Natural gas production from wells in New York leveled off last year, increasing marginally after increases of 17% between 2004 and 2005 and 30% between 2003 and 2004, the New York State Department of Environmental Conservation (DEC) said Monday.
The DEC’s Annual Oil & Gas Production Report indicates that total reported gas production for the 2006 calendar year was 55.157 Bcf, just above the 2005 record total of 55.156 Bcf. According to the DEC, the 2006 production level, which was enough to supply the needs of nearly 800,000 homes for a year, was driven by prolific wells in the deep Trenton-Black River formation in the Finger Lakes region.
DEC Commissioner Pete Grannis said private investments in new production, especially in the Trenton-Black River formation, are expected to increase in coming years. The formation remains the state’s dominant gas production zone, accounting for almost 78% of production, but production at Trenton-Black slipped to 41.8 Bcf in 2006, down from 44.0 Bcf a year before. Production at Trenton-Black had leaped 11.4% from 2003 to 2004, and another 8.1% from 2004 to 2005. The slight decline in the formation’s 2006 production was offset by gains in other producing formations, Grannis said.
Natural gas production in New York was the highest in state history, but the steep increases seen in recent years plateaued in 2006 and may not return for some time, according to David Pratt, a staff member of the DEC’s Bureau of Oil and Gas Regulation Compliance and Enforcement Section. Pratt told NGI that new discoveries in the state are down and production in the Trenton-Black River formation has slowed.
“Absent any newer discoveries, production will probably be lower again next year,” Pratt said.
Since 1996, independent oil and gas companies have invested an estimated $825 million in Trenton-Black River development, with an average well cost of more than $2.5 million. Most of the exploration has been south and west of the Finger Lakes, with exploratory wells drilled as far east as Montgomery County and as far west as Cattaraugus County. The Trenton-Black River production extends west to Michigan and Ontario and south to West Virginia. Last year the DEC said new and existing Trenton-Black River wells were responsible for the state’s second consecutive year of record production (see Daily GPI, Aug. 3, 2006).
Oil production in New York increased 51% between 2005 and 2006, with a total of 319,099 bbl reported by purchasers, responding to high oil prices. Pratt said current oil prices make it easier for the hundreds of new wells drilled in the state last year to become profitable. “With the price of oil today they pay out pretty quickly,” he said.
DEC issued 622 drilling permits in 2006, the most in more than 20 years and 43% more than in 2005. Permits issued included 353 for natural gas wells, 190 for oil wells, 34 for geothermal wells, 11 for brine production wells, 23 for stratigraphic wells and 11 for underground gas storage wells. DEC reported that drilling in New York continues at a very active rate. In the first six months of 2007, DEC received 319 permit applications — 224 for gas wells, 72 for oil wells, five for geothermal wells, 14 for brine wells and four for underground gas storage wells. A total of 12,400 existing oil and gas wells were reported in operation in 2006 — 936 underground natural gas storage wells, 123 brine production wells and 71 geothermal wells.
According to the DEC report, total market value of 2006 oil and gas production in New York was $413 million. Landowners received an estimated $49.2 million in production royalties. Local government taxes on the market value of production were an estimated $124 million. The average price of natural gas in New York was $7.13 per thousand cubic feet and the average wellhead price of oil was $62.38 per barrel.
Legislation encompassing a sweeping reform of leasing and drilling rules was created in New York in 2005 (see Daily GPI, Aug. 8, 2005). The laws were designed to help with development of the Trenton-Black River formation, which was first opening for production at the time.
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