Marcellus Downturn | Russell T. Rudy Energy LLC
“Rigzone” reports that while the drilling boom of the last seven years is over, the Marcellus shale, the nation’s newest and biggest gas field, still produces a fifth of our natural gas. However, there is disagreement as to how long production in the 90,000 square mile area will continue to increase.
The U. S. Energy Information Administration (EIA) predicts an increase in Marcellus gas production in 2016. However, there has been an alarming downturn in drilling permit applications in the area that encompasses parts of Pennsylvania, Ohio and West Virginia. At the peak in 2010, over 600 drilling permits were issued a month. In October, of this year, the number fell to 68. This precipitous drop, in conjunction with natural depletion from existing wells, could mean production decreases next year.
Back in 2010 prices were strong and domestic natural gas production increased for 6 years in a row. However, increased supplies resulted in prices dropping by two-thirds since then. Over the past year NYMEX gas futures have dropped from $4 per Million British Thermal Units, to $2. Given the huge volumes available in the Marcellus, and its proximity to Northeastern markets, prices there are even lower.
In response, some operators such as Chesapeake Energy, Cabot Oil and Gas, and Inflection Energy have all cut back on production. Inflection spokesman Matt Henderson observed “It is better to choke back than to sell into this market.”
While a cold winter might help prices recover, many local are not optimistic as to timing. Justin Kastner, a land broker, has cut his staff in half and observes “There is just too much gas. I expect to see a downturn for the next two years.”
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/141894/INSIGHT .
