Unconventional natural gas production volume growth in Pennsylvania decelerated during the fourth quarter according to the state’s Independent Fiscal Office (IFO).

PAgas

IFO reported horizontal gas well production volume of 1.949 Tcf for 4Q2021, representing a 6.7% year/year growth rate. That was lower than the 7.2% uptick that data showed for 3Q2021.

For 2021, IFO said Pennsylvania’s production grew by 6.8%, up from 4% in 2020, which was marred by Covid-19 disruptions. The agency also had reported a strong start to 2021.

“Despite the increase from prior year growth, the rate of 6.8% still represents a deceleration from pre-pandemic rates,” stated IFO. “From 2016 to 2019, horizontal production volume increased,” climbing on average by about 10.2%/year.

The IFO said horizontal wells produce more than 99% of the state’s natural gas.

Only five counties accounted for three-fourths of gas production volumes in 2021, with Susquehanna County commanding a 21.4% share, IFO stated. The other top counties were Washington (18.4%), followed by Bradford (15.3%), Green (14.4%), and Lycoming (5.5%).

Pennsylvania is the United States’ second-largest natural gas producer, after Texas. Other states rounding out the top five include Alaska, Louisiana and West Virginia.

Annual Spudding Increase

In terms of horizontal gas well starts, 154 wells were spudded in Pennsylvania in 4Q2021, reflecting a 55.6% year/year increase, IFO said. The total number of wells spud in 2021 was 518, up 8.8% year/year.

IFO also pointed out the 2021 figure represented the first year/year annual increase in new wells spud in Pennsylvania since 2017.

To be sure, 2020 was an exceptional down year for gas producers in Appalachia and elsewhere as they made price-related curtailments to deal with low demand.

IFO said Pennsylvania’s total producing well count reached 10,762 in 4Q2021, up 4.2% year/year but lower than the 5% growth rates for the two previous quarters. The data showed a producing well count growth rate of about 4.8% for the full year.

“Growth in producing wells has consistently declined over the last four years and has dropped to its lowest rate on record,” stated IFO. 

Within the past 16 months, IFO data showed the annual producing well count growth rate peaking at 11.6% in 2Q2018.

“Without a significant uptick in new wells spud, producing well growth will likely continue to decelerate or stagnate,” IFO officials said.

For 4Q2021, Pennsylvania’s average regional spot natural gas price was $3.97/MMBtu versus an average Henry Hub spot price of $4.74, stated IFO.

The “data show that the Henry Hub price increased by 91.7% from the same period in 2020 and the average Pennsylvania hub price increased by 186.0%.”

IFO attributed the “significant” price gains to a mix of “weaker-than-usual production growth” and a rebound in demand amid waning closures and other Covid-19 effects on the economy.

IFO’s figures also reveal a $3.835 average Henry Hub spot price and a $3.0275 average Pennsylvania spot price for 2021.

President Daniel J. Weaver of the Pennsylvania Independent Oil and Gas Association told NGI the price differential between the Henry Hub and Pennsylvania trading points continues to strain the profit margins of the state’s gas producers.

Weaver said “the true potential of natural gas development in the Appalachian Basin remains stifled by a lack of access to markets due to infrastructure bottlenecks to regions where demand for natural gas is increasing.”

Operational efficiencies and “sustained domestic and global demand” have contributed to Pennsylvania’s natural gas production gains and show the Appalachian Basin’s “strong fundamentals,” said President David Callahan of the Marcellus Shale Coalition.

“We’re well positioned to continue delivering the energy society needs, but regulatory hurdles, infrastructure constraints, and political activism absolutely stand in the way of these opportunities,” he said.