Appalachia Shale at the Front in the Shale Revolution

Tom Shepstone
Natural Gas NOW

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The Marcellus and Utica Shale plays, now jointly referenced as the Appalachia shale region, are at the very front lines of the American shale revolution.

The latest “Drilling Productivity Report” issued by the Energy Information Administration (EIA) is mind-blowing for those who might imagine (correctly) the Northeast is a difficult place to do oil and gas. It demonstrates why fractivists have no hope, in the end, of anything but temporary successes in their battle to rub out economic opportunity in our region. The economics are just too good to ignore.

The EIA’s “Drilling Productivity Report” comes out monthly but it’s been some time since i really analyzed it. The latest version came out Monday and it’s accompanied by some charts demonstrating the unstoppable nature of the Appalachia shale industry. The trends are, in fact, stunning. Take, for example, this:

Notice the incredible increase in drilling productivity within the Appalachia shale region. New-well production per drilling rig is nearly twice that of any other region and as much 15 times that of some regions. Commodity businesses only prosper through increased productivity and no region is leading the shale revolution like the Appalachia shale region. It is also growing in productivity faster than most shale regions, gaining more in one year than the Permian shale region produces altogether.

Morerover, here’s the trend over time:

It’s a case of continuing productivity increases that have resulted in steady gains in production with fewer rigs. This is how to succeed in a commodity industry. It has, in the case of the Appalachia shale region, resulted in equally steady growth in overall production, as evidenced by this chart:

Notice, too, where this has placed the Appalachia shale region with respect to other shale regions. What we see in Ohio, Pennsylvania and West Virginia are the very front lines of the shale revolution; a revolution that has changed everything for the better. It has produced rural revitalization, delivered inexpensive gas to urban areas saving consumers billions of dollars and it has allowed the U.S. to claim more progress in reducing emissions than any other nation, all without subsidies from other ratepayers and taxpayers.

The Appalachia shale region success story, though, goes even deeper. It completely disproves what favorite fractivist economic prognosticator Deborah Rogers (the former model and goat farmer) was saying about shale a half-dozen years ago or so. She claimed  gas companies were on a treadmill of drilling new well as fast as they could just to pay mortgages because shale gas well decline curves were supposedly so horrible. Yet, here is what has happened:

Yes, the production from older legacy wells s steadily decreasing (how could it be otherwise?) but notice the loss was only 907 million cubic feet per day, while the production from new wells grew by 1,205 million cubic feet per day. New production added was nearly a third more than what was lost with legacy well production. This has been been going on, more or less steadily, for almost a decade now. Does this look like a treadmill to you?

No, of course not. The Appalachia shale region is a success story for the ages. And, it’s driving fractivists crazy. They know economics ultimately determines outcomes and the success of shale on both the economic and environmental fronts is undeniable. What’s happening in the Northeast is foundational, despite the superficial politics and the difficulty of doing business here. Shale is the future and it’s happening here.

 

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