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Shale gas permitting plummets in Pennsylvania as producers scale back

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Shale gas permitting plummets in Pennsylvania as producers scale back

Still under pressure from investors to throttle back spending in the face of low natural gas prices, Pennsylvania's shale gas drillers pulled 23% fewer permits for new wells in August compared to 2018 and 14% fewer permits compared to July.

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 saw an uptick in activity-driven supermajor Chevron Corp.'s 11 permits in the county southeast of Pittsburgh.

Another global oil and gas producer, Spain's Repsol SA, joined with National Fuel Gas Co. drilling unit Seneca Resources Corp. to almost 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. Inc.

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 the market, analysts said. Activity is expected to slacken throughout the second half of this year.

"The real problem is that the SW Marcellus and Haynesville have continued to grow rapidly, even at a lower price than we anticipated," Sanford C. Bernstein & Co. analyst Jean Ann Salisbury told clients July 24. "The Marcellus/Utica added 5.3 Bcf/d year-over-year and the Haynesville an astounding 2.7 Bcf/d. 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," Jefferies LLC shale oil and gas analyst Zach Parham told clients Sept. 5. "The Appalachia rig count is now down nine rigs YTD and 18 rigs off the recent high (April 2019), and producers have signaled further drops coming in the second half of the year ([Antero Resources Corp.], EQT Corp., [Gulfport Energy Corp.], [Southwestern Energy Co.], [Range Resources Corp.])."

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