The Marcellus Shale| April 2020
The Marcellus Shale is the largest gas play onshore in the US. Located in the Northeast, it supplies the high demand markets along the East Coast. Most of the basin’s gas is produced through unconventional methods, while the little oil produced is mostly by conventional means. Some of the top formations include Onondaga and the Huntersville.
State Drilling Statistics
Active Drilling Rigs in Basin- 32
Total Rigs in Pennsylvania- 25
Total Rigs in United States- 465
Total U.S. Rigs down 53% YTD
State Top Producers
Top Gas Producer- April Data Currently Unavailable
Financial & Economic Updates
Marcellus Poised for a Comeback
While declining oil prices have impacted most everyone negatively, gas producers who keep their costs low may be in an advantageous position in the near future. Since oil production has been declining, that means associated gas production is declining as well. According to Narmadha Navaneethan, director of North American upstream research for IHS Markit, every 500,000 barrels per day of production decline correlates to an associated gas decline of 1B standard cubic feet per day. This means that producers in the Marcellus may benefit from improved natural gas and NGL pricing as production costs are rather low comparatively.
Shell Likely to Remain the Only Petrochemical Giant in Pennsylvania
In the summer of 2016, Shell proposed its plan of a $6 billion petrochemical facility in western Pennsylvania. Governor Wolf expressed large support for the project as he thought this ethane processing facility would bring big money and big business into the state. It seemed a nice site for gas processing that other companies took notice of as more proposals came into the state. Unfortunately, current oil and gas pricing has put a halt to those projects, and the fact that there is a strong debate over whether or not companies can use the stimulus bailout loans to pay their debt is certainly not helping. Other facilities will likely never be built to match the magnitude of Shell’s facility, leaving the Royal Dutch company in a great position to profit should natural gas demand increase with decreased associated gas supply.
Abandoned Oil and Gas Wells to be Pennsylvania’s Next Big Problem
The oil and gas industry is no stranger to Pennsylvania, but the rich history of development has left 200,000 orphaned oil and gas wells in the state, some dating back to before there were abandonment regulations. Each abandoned well does hold the potential to channel volatile hydrocarbons to the surface and pollute nearby ecosystems. The Pennsylvania Department of Environmental Protection (DEP) is struggling to catch up with the work laid out for them. In one year, they receive about $1 million to fund the work which seals a little less than a dozen wells per year. Current commodity prices loom over the DEP as it holds potential for economic fallout for many companies, leaving the possibility of hundreds of more orphaned wells to spring up in the next few years.
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