Pennsylvania Permitting Plummets As Natural Gas Producers Pull Back

(October 1, 2019) — Still under pressure from investors to throttle back spending in the face of low natural gas prices, Pennsylvania shale gas drillers pulled 23% fewer permits for new wells in August compared with 2018 and 14% fewer permits compared with July, writes S&P Global Platts.

The single biggest drop-off in activity occurred in Greene County in the gas- and liquids-rich portion of the Marcellus Shale south of Pittsburgh. Neighboring Westmoreland County, however, saw an uptick in activity, driven by super-major Chevron’s 11 permits in the county southeast of Pittsburgh.

Further, another global oil and gas producer, Spain’s Repsol, joined with National Fuel Gas drilling unit Seneca Resources to nearly triple the number of August permits year over year in northeastern Tioga County, presumably to take advantage of the increase in outbound pipeline capacity spurred by Williams Cos.

The decline in permitting activity statewide is directly reflected in the falling rig count in the Appalachian shales and low nationwide gas prices from huge supplies of gas coming onto to the market, analysts said. Activity is expected to slacken throughout the second half of this year.

“The real problem is that the southwest Marcellus and Haynesville have continued to grow rapidly, even at a lower price than we anticipated,” Stanford C. Bernstein & Co. analyst Jean Ann Salisbury told clients. “The Marcellus/Utica added 5.3 Bcfd year over year and the Haynesville an astounding 2.7 Bcfd. We believe that price must force these two basins to not just stop growing, but decline from today to their beginning-of-year level, and keep them there going forward to make storage balance.”

“Low gas prices are clearly having an impact on the rig count, with gas rigs at the lowest level since April 2017, though supply has yet to be affected,” Jeffries shale oil and gas analyst Zach Parham told clients in September.

(SOURCE: The Weekly Propane Newsletter, September 30, 2019. Available by subscription)