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Active drilling rigs in W.Va., Ohio down by half

WHEELING, W.Va. — For the first time since the U.S. Energy Information started tracking the data, natural gas production from shale formations – including the Marcellus and Utica – is set to decline in September amid a glut of supplies related to inadequate pipeline infrastructure.

Also, with natural gas prices down by more than $1 per unit compared to this time last year – and crude oil crashing to a value lower than $39 per barrel – both Ohio and West Virginia continue to see fewer rigs drilling within their borders.

According to the EIA, all U.S. shale natural gas production recently reached a record high of 45.6 billion cubic feet per day. To put that in context,1 Bcf can power 85,000 road trips across the U.S. However, officials believe the number will decline to 44.9 Bcf per day next month.

In the Marcellus formation, the government expects production to fall by 60 million cubic feet per day next month, while yields from the deeper Utica formation are set to drop by 3 million cubic feet per day.

“We leased a bunch of property for a bunch of money; we drilled a bunch of wells to hold the property; now we have nowhere to put the gas,” Tim Greene, owner of Land and Mineral Management of Appalachia and a former West Virginia Department of Environmental Protection inspector, said of the predicament now facing the industry in the Mountain State. “There is no reason to produce gas if you have nowhere to send it – or no way to get it there.”

In addition to the Marcellus and Utica shales in Ohio, West Virginia and Pennsylvania, other shale formations included in the EIA data are the Bakken Shale in North Dakota, the Eagle Ford Shale in Texas, the Haynesville Shale in Louisiana, the Niobrara Shale in Colorado and the Permian Shale in Texas.

Officials with EIA said the number of rigs drilling in a region is a major factor in determining how much gas that area should produce. According to oilfield services firm Baker Hughes, there were 42 active rigs in Ohio at this time last year, but that number is now less than half at 19. West Virginia saw 28 rigs grinding into the earth in August 2014, but the number is now down to 18.

“Operators have slowed down due to the price,” Timothy R. Carr, Marshall Miller Professor of Energy at West Virginia University, said. “The price is depressed due to the absence of pipeline takeaway.”

However, at least one driller is increasing its work in the Utica shale, as EQT Corp. recently drilled a single well in Greene County, Pa. that pumped 72.9 million cubic feet of gas in 24 hours. This smashed the previously known Utica high flow rate of 59 million cubic feet per day set by a Range Resources Washington County, Pa. operation late last year.

“Given the extraordinary initial results of our first dry Utica well, we are accelerating our efforts in Greene County,” Steve Schlotterbeck, EQT executive vice president, said. “Our focus is on creating a capital-efficient, dry Utica development plan that leverages existing pads, existing gathering infrastructure, and takeaway capacity.”

Still, Greene said the oil and natural gas industry needs three pillars to succeed: Supplies in the form of the gas, infrastructure to transport the gas and a customer to buy the gas. At times when drilling is down, pipeline building should endure.

“When this business is up, it’s really up. When it’s down, it’s really down,” he said. “You just have to ride it out.”

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