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Ohio''s latest shale oil and gas production numbers are in, and they don''t look like good news. In a release issued just hours before the Labor Day weekend began, the Ohio Department of Natural Resources released the production numbers for the second quarter and first half of the year. The agency noted that of the 1,415 Ohio horizontally-drilled shale wells in the state, only 1,362 reported production. A year earlier, the agency reported 978 of the 1,020 shale wells reported production. Oil production has fallen dramatically below year-ago levels, from 5.9 million barrels during the second quarter of last year to 4.8 million barrels during the same period this year. Gas production is actually higher compared to year-ago quarterly output levels, but it''s clear that the roaring quarter-to-quarter increases in gas production that created so much optimism over the last couple of years have ended. Ohio may be the Saudi Arabia of gas, as many producers joked as early as 2009, but gas that sells for about half the already-low national prices is not going to be produced for long. The evidence of a gas slowdown can be seen in the increase, which is only slight, from the first three months of the year to the second three-month period and then comparing that increase to last year. In the first quarter of this year, shale gas production totaled 329.4 billion cubic feet. Production edged slightly higher during the second three months, coming in at 334.3 billion cubic feet. Compare that to the difference between the first and second quarters of 2015, when production zoomed from 183 billion cubic feet to 222 billion cubic feet, then jumped to 247.5 billion cubic feet in the third quarter and to 302.4 billion cubic feet in the last three months of 2015. The oil situation is even more dramatic,especially comparing year-over-year totals. Oil production in the second quarter was down almost 20 percent from production during the same time in 2015. Ohio shale wells produced 4.84 million barrels of oil in April, May and June, down from 5.95 during the same period in 2015. With these second quarter production numbers, there is nothing to brag about, said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. Production of natural gas is leveling off. And oil production within the Utica [play] has fallen dramatically, he said. There are currently about a dozen rigs drilling horizontal wells in Ohio''s Utica shale. Bennett said the slight increase in gas production quarter over quarter, is the result of well operators completing wells they drilled but did not fracture in previous years because they were waiting either for pipelines to be built or prices to increase. The few rigs now working are in extreme eastern portions of the state, in Belmont and Monroe counties, where the shale yield natural gas but little oil, he said. Producers in those counties are now able, at extra cost, to lease space on pipelines and move their gas out of the region to areas where prices are much higher. There is always a lag time, Bennett said of the time between a drilling slowdown or uptick and the production results. The production growth just isn''t there. And the decline rate is beginning to kick in. The situation is not likely to change, he added, until more pipelines are built to diminish the glut of gas here, and until the national prices of oil and gas move higher. The construction of one or more ethane refineries, or crackers, in the region, will also create demand for more Ohio gas production, he said. Shell Chemical has committed to building a cracker in Beaver County, Pa., near Youngstown. An Asian consortium is planning to build a cracker on the site of FirstEnergy''s old R.E. Burger coal-burning power plant. What you are seeing today in production reflects the current economy. Lower prices have created lower production. Until prices rebound we will not see growth like we did in 2014, he said. The entire industry has slowed down. Whenever national and global prices do increase, re-starting the industry here will likely lag other states, especially those that produce a lot of oil, because Ohio''s shale gas industry was in its infancy when prices fell. This is not just a pause button. This is actually almost a re-set button, Bennett said. |
