Marcellus shale gas boom expected to slow in 2013
Energy experts say the boom in Marcellus shale natural gas production will slow this year but not because there's any lack of supply.
The slowdown is happening because drillers are waiting for pipelines to expand, markets to develop and wholesale prices to rise.
“The hiring has tapered off. What we see is a holding pattern,” said Kathryn Klaber, president of the Marcellus Shale Coalition, an industry group.
That's a big difference from the last four years, when production doubled or tripled every 12 months and companies spent tens of billions of dollars on leases, well drilling and related infrastructure.
Klaber said companies are still confident there's money to be made, since independent analysts say the Marcellus is the most economical place to drill for shale gas in the nation.
The Marcellus shale is a gas-rich formation deep underground that extends across Pennsylvania, West Virginia, New York, Ohio and Maryland, but most of the production is in Pennsylvania and West Virginia.
A rush of drilling that brought more than 100 rigs to Pennsylvania tapered off in 2011 as prices started to drop. Dozens of rigs moved westward to the Pittsburgh area and Ohio where valuable liquid gases like ethane and propane come up with the methane.
Even that interest had waned in the past year as prices for those commodities started to drop. Producers often have been concentrating on oil or just trying to keep production lower until prices rise. Several analysts who came Downtown last month for Hart Energy's conference on Appalachia's pipelines and processing plants said they thought drilling might decline.
“We see 2013 as being a pretty difficult year” for producers looking for natural gas liquids, said David Deckelbaum, an oil and gas analyst at KeyBanc Capital Markets. “We still think we're setting up for a perpetual oversupply issue for the next few years.”
Bentek, a Colorado company that analyzes energy trends, said figures from the pipelines that take gas out of the Marcellus shale show that Pennsylvania production rose to about 2 trillion cubic feet in 2012 — roughly double the prior year's total. Production from West Virginia was about 700 billion cubic feet in 2012, bringing the total Marcellus shale gas output to about 2.8 trillion cubic feet.
That's about 10 percent of the nation's output of natural gas. Bentek estimates that Marcellus shale gas production will grow by about 30 percent this year, though numerous factors could affect the final number. One billion cubic feet of gas is equivalent to about 180,000 barrels of crude oil.
The official 2012 production figures for Pennsylvania and West Virginia have not yet been released by those states, but Bentek figures are considered very reliable by government and industry sources.
Wall Street analyst Manuj Nikhanj, the head of energy research for ITG Investments, agreed with Klaber's assessments.
“I do think we're going to see growth in 2013, but the rate of growth will slow,” Nikhanj said. Drillers are getting “better and better” at improving the output for each well, he added.
In 2011 and 2012, there was a highly publicized debate over the potential of the Marcellus shale, with some claiming the industry had exaggerated the reserves. Actual production figures have mostly put that debate to rest. When serious well drilling started in Pennsylvania in 2008, output barely registered on a national level. Now it's grown to be the nation's most productive gas field.
Now, Klaber and Nikhanj said, the bigger questions are over how fast pipelines and new markets for Marcellus shale gas can expand.
Since the price of natural gas has been relatively low, many companies operating in the Marcellus began to drill wells but have delayed putting them into production for now, Klaber said.
“There's a staggering number of wells waiting to go online,” she said.
Nikhanj estimated that 700 wells have been drilled but not hooked into production and thousands of wells have been issued permits but have not begun drilling.
The Associated Press and Trib Total Media staff writer Tim Puko contributed to this report.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Vote set at SEC to reveal pay gap between CEO and median employee at publicly traded companies
- AmEx’s accord with merchants over fees rejected by judge
- Private schools fill void in driver education in Western Pennsylvania
- Esmark CEO Bouchard: Steel industry ‘weathered through the storm’
- Earnings misses by Allstate, NRG drag market lower for 3rd consecutive day
- Delphi buys CMU spinoff that makes self-driving car software
- Groups appeal Shell air permit for Beaver County project
- Operating loss mounts at Highmark’s core hospital system
- Obama’s Clean Power plan doesn’t change much; opponents remain firm
- FNB buying Harrisburg-based Metro Bancorp
- Coal producer Alpha Natural Resources files for bankruptcy