Wednesday, July 6, 2011

Three Years of the Shale Gas Revolution:
And Conventional Drilling Crashes in NY

Online records covering oil, gas, and other wells from the New York State Department of Environmental Conservation show the number of newly "spudded" wells has dropped between 44 and 62 percent compared to 2008 — a time period covering three full years of a hotly contested shale gas freeze.

Counting all oil and gas wells — and even including non-fossil-fuel-producing wells such as stratigraphic, brine, storage, and geothermal — the state's database shows the number of wells started dropped from 541 in 2008 (the last year of a very high, three-year run) to 297 in 2009, 302 in 2010, and 208 in 2011.  The 2011 numbers are based on a full-year projection, running forward from where the stats stood as of the half-year mark on June 30.

Looking at the numbers of wells permitted — some of which have not been drilled, may never be drilled, or were not drilled in the same calendar year — approved applications from industry dropped between 25 and 60 percent
, from 738 in 2008 (the highest of three very active years) to 552 in 2009, 472 in 2010, and on track for 298 in 2011.

Examining all wells completed — some of which may have been permitted or spudded in prior years — the decline in activity is similar:  Down between 40 and 75 percent, from 536 in 2008, to 280 in 2009, to 322 in 2010, and a projected 134 in 2011.

By pretty much any measure, the numbers from 2011 indicate NY is on a pace to rack up its worst year for drilling since 2003 or 2004.

Note that these numbers are based on the online records for all 4,371 wells permitted in New York State since 1-1-2000, as those records electronically existed on 7-6-2011.  Drilling permits applied for, but never granted, were not covered.  It is also likely that there will be a number of 2011 records which had not yet been entered into the database as of 7-6-2011.

I also happened to notice that — sometime since July 1 — the DEC has rearranged its online well production database to allow for queries covering 2010 oil and natural gas production, although I haven't yet had a chance to try delving into that data.  Summaries of these statistics are typically compiled by the DEC Minerals Division in an annual report released to media, and posted online here, around late July of each year, and covering the previous full calendar year.  The production records are based on filings from industry that are due March 31, but which are held in confidence until July 1.

A year ago, New York State natgas production was reported to have dropped about 11 percent by volume in 2009, compared to 2008.  If the stats on wells permitted, spudded, or completed are any guide, then 2010 should have witnessed a similar or worse dropoff — especially when factoring in the natural declines in production from any already drilled well.

Note that the drop in wells permitted, spudded, or completed since 2008 is not directly due to the state's Marcellus moratorium serving to freeze out a large number of previously existing projects.  That's because none of the New York drilling records (before or since 2008) has ever included a permitted, full-on, full-horizontal, full-fracture shale gas well.  Before February 2008, industry had not yet ever proposed such a project in New York, and no such permits have been granted since, due to a sequence of administrative moratoriums, which are now on track to be lifted in 2012.

In Pennsylvania, the first such well was drilled and fracked without publicity as early as October 2004.  A number of additional gas-bearing eastern states — namely Ohio, West Virginia, and Michigan — have since found ways of following PA's lead, without getting bogged down in much political controversy.

New York, on the other hand, has witnessed a drilling decline which appears indirectly related to the moratorium, acting in conjunction with dramatically increased investment focus on unconventional shale gas, to the exclusion of more conventional source rocks.

Industry has chosen to drill fewer such traditional wells in New York (which the state has always permitted, and which it still permits, both before and since 2008), and is instead transferring much of that investment capital to shale gas developments in other states, such as Pennsylvania, where there has been much less regulatory holdup.

In Pennsylvania, the amount of oil and gas activity — even based solely on the most conservative counts of actively drilling rotary rigs — has gone virtually off the charts from 2007 to date, driven largely by the boom in developing horizontal wells in the Marcellus shale formation.


OtsegoProActiveNetwork said...

In Otsego County the purveyors of the anti-message have told County residents that there is no difference between high volume hydraulic fracturing and low volume conventional wells. As a result there was an outcry against any kind of natural gas development. There was an operator who was interested in developing the sands and they were quickly turned into the enemy.

Gas Powered Drill said...

New York State natgas production was reported to have dropped about 11 percent..If the status repeats then 2011 should witness for a worse situation..