April 03, 2011|By Andrew Maykuth, Inquirer Staff Writer
Natural gas companies have been drilling in Pennsylvania for more than a century, but Marcellus Shale exploration is unlike anything before.
Consider Seneca Resources Corp., which has operated traditional wells that capture gas beneath a small acreage. Seneca has joined the rush to drill deep Marcellus wells, which collect gas beneath vast reaches of land.
“By the time we got to about six wells, we were producing more in the Marcellus than we were in our 3,000 shallow wells,” Matthew D. Cabell, Seneca’s president, told investors in January.
As Marcellus Shale operators move into full-scale production, several trends are emerging that underscore the huge transformation under way in Pennsylvania.
While the 1,386 Marcellus wells drilled last year fell short of early projections of 1,750, operators are drilling bigger wells with longer laterals, some reaching underground for more than a mile.
The bigger wells require larger amounts of water, steel – and money. Operators say they are spending $4 million to $6 million per well.
The drilling is producing greater environmental anxiety, measured by a growing opposition to hydraulic fracturing, the method used to extract gas from shale.
But investors are still bullish, emboldened by production figures released by the Pennsylvania Department of Environmental Protection.
“The Marcellus is going to be far more prolific than we ever imagined,” said Subash Chandra, managing director of Jefferies & Co. Inc., an investment company. “It’s almost scary how good the Marcellus is. It’s supereconomic.”
Last month, 102 drill rigs were operating in Pennsylvania, up from 27 two years ago, according to Baker Hughes Inc., of Houston.
Though the Marcellus formation lies under half the state, drilling so far is concentrated in a few counties.
Five companies, led by Chesapeake Energy Corp., produced 69 percent of the Marcellus Shale natural gas over the 18 months ended Dec. 31, according the Powell Shale Digest, a trade publication.
And 80 percent of the Marcellus gas was produced in just five counties – Bradford, Susquehanna, and Tioga Counties along Pennsylvania’s northern border and Washington and Greene Counties in the state’s southwest corner.
Drilling has outpaced the industry’s ability to sell the gas.
Only 1,237 of more than 2,300 Marcellus wells drilled were producing gas at the end of 2010.
Hundreds of wells are finished but awaiting construction of pipelines to carry the fuel to consumers.