Even with fewer drill rigs, shale gas production continues to rise

The number of drill rigs operating in Pennsylvania's Marcellus Shale may be declining, but production keeps going up.

Natural-gas output increased robustly during the first half of this year, according to state Department of Environmental Protection data. And industry observers say the output will continue to rise because so many wells are waiting to be connected to pipelines.

Pennsylvania's "unconventional" shale-gas wells - those that unlock gas entrapped in tight rocks like shale, as opposed to conventional wells that tap into concentrations of free-flowing oil or gas - produced 895 billion cubic feet of gas in the first six months of this year, up nearly 42 percent from the previous reporting period, according to an analysis by the Powell Shale Digest, a trade publication based in Fort Worth, Texas.

That's about 13 times the amount of gas consumed for an entire year in Philadelphia.

The number of producing wells increased by 28 percent, to 2,879. Production is likely to continue increasing because one-third of the wells drilled in the state are not yet selling their output to the market, said Thomas B. Murphy, co-director, energy development, of Penn State University Extension's Marcellus Center for Outreach and Research.

Many wells that have been drilled are waiting to be hydraulically fractured. The controversial process involves high-pressure injection of chemically treated water and sand into the shale formation to stimulate wells.

Other wells that have been fracked are shut-in, or capped, while awaiting completion of pipelines to transport the natural gas to market.

Though the growth rate is slowing from the early years of the shale boom, Pennsylvania Marcellus gas production is expected to increase 78 percent by the end of 2015, according to an August report by Bentek Energy, a market-analytics firm.

Drill rigs have packed up and moved to oil-producing states in the last year as natural-gas prices have plunged because of an oversupply.

Pennsylvania had 63 rigs operating last week, down from 111 a year ago, according to Baker Hughes Inc. That was the lowest number of operating rigs in the state in three years.

But the decline in rigs does not correspond directly to a loss in production because an individual drilling crew is able to accomplish more now than when exploration first began in the Marcellus.

Drillers are completing horizonal wells more quickly, and the wells capture more shale because they reach laterally much farther than they did only two years ago. The reduction in gas prices has forced the industry to be more efficient.

The state's semiannual production figures show that even though unconventional drilling is taking place in 30 counties, the business is concentrated in a few counties, by a few operators.

The top five gas producers - Chesapeake Energy Corp., Cabot Oil & Gas Corp., Talisman Energy USA Inc., Range Resources Corp., and Anadarko Petroleum Corp. - accounted for 61 percent of the state's production.

Drilling is concentrated in southwestern Pennsylvania and the state's northern tier. The four most productive counties are all in the north: Bradford, Susquehanna, Lycoming and Tioga, which account for 68 percent of the production.

A Powell Shale Digest well-by-well analysis found that the top 25 wells were drilled by only two companies, Cabot and Citrus Energy Corp., and that they were concentrated in five townships in Susquehanna and Wyoming Counties where the mile-deep Marcellus is about 300 feet thick.

Citrus Energy, a small producer based in Colorado, has become Pennsylvania's 10th-largest producer with only 14 wells in production, all in Wyoming County. Citrus has the two top wells in the state, both located in Meshoppen Township. Citrus has 26,500 acres under lease, including more than 1,300 acres under the gigantic Proctor & Gamble Co. paper-products complex in Mehoopany, Pa.

The state production report initially generated some confusion because it did not include Chesapeake, the state's largest producer.

The report also has changed slightly from the past, when it included only production from the Marcellus Shale. Now, the report represents production from "unconventional" wells including a few dozen wells in the deeper Utica Shale, because all shale wells are subject to the impact fee imposed by Act 13, the oil-and-gas law enacted this year.