PITTSBURGH (AP) — 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, new markets to
develop and wholesale prices to rise.
"The hiring has tapered off.
What we see is a holding pattern," said Kathryn Klaber, the 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 that 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.
Bentek, a Colorado company
that analyzes energy trends, said figures from the pipelines that take
gas out of the Marcellus show that Pennsylvania production rose to about
2 trillion cubic feet in 2012 — roughly double the prior year.
Production from West Virginia was about 700 billion cubic feet in 2012,
bringing the total Marcellus 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 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
haven't 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. But he added that drillers are getting "better and
better" at improving the output for each well.
In 2011 and 2012,
there was a highly publicized debate over the potential of the Marcellus
Shale, with some claiming that the industry had exaggerated the
reserves. But 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 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 haven't begun drilling.
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