Source: The Philadelphia Inquirer, December 15, 2013
Posted on: http://envfpn.advisen.com
When David Dewberry landed in Pennsylvania in 2010, the veteran of the migratory worldwide oil-and-gas workforce said he required more than a month to drill a typical Marcellus Shale natural gas well.
On Dec. 4, a crew under Dewberry’s direction dug into the mountaintop of a state forest near here with a diamond-studded drill bit. Dewberry reckons it will require only 16 days to finish drilling the well’s full length, more than 21/2 miles.
“Since I came up here three years ago, it’s 200 percent better,” said Dewberry, who manages this Lycoming County site in Loyalsock State Forest for Seneca Resources Corp.
The well not only will require half the time to drill, the bore will extend farther horizontally than older wells. And, if it performs like other wells in the area, it will produce a staggering amount of gas.
When it’s done, the towering rig will crawl 20 feet and begin drilling another well. Seneca plans to complete nine wells in an assembly-line fashion on this site, which is the size of five football fields.
“We’ve become so much more efficient,” Dewberry said.
Marcellus Shale exploration companies are drilling bigger wells in less time at less cost, and they are producing more natural gas than ever in Pennsylvania.
Despite a reduction in the number of drill rigs operating in Pennsylvania in the last two years because of the low price of natural gas, each rig is accomplishing much more. The Marcellus, which includes wells in West Virginia, now produces nearly a fifth of the nation’s natural gas.
Efficiency pays
In the industry, productivity has become the watchword. Gas producers vying for investor money tout their skills to more efficiently deploy capital than the competition.
Many of the improvements in recent years are attributed to the experience producers have acquired in the Marcellus formation.
“You experiment until you hit the jackpot,” said Terry Engelder, a Pennsylvania State University geoscientist and leading expert in Appalachian black shales.
The U.S. Energy Information Administration (EIA), recognizing that the drill-rig count is an obsolete measure of output, recently presented a new way to quantify efficiency that takes into account drilling speed and production. By that measure, the Marcellus accounts for much of the growth in the nation’s gas production.
Adam Sieminski, the EIA’s administrator, told the Columbia University Center on Global Energy Policy in October the turnaround in the domestic oil and gas industry is transformational.
“For natural gas, EIA has no doubt at all that production can continue to grow all the way out to 2040,” Sieminski said.
The new fossil-fuel boom relies upon advances in horizontal drilling and hydraulic fracturing, the technique that involves pumping a mixture of water, sand, and chemicals under high pressure into source rock to crack it open to release oil and gas.
Despite the ongoing controversy over fracking — activists want a drilling moratorium in Pennsylvania because they say it may cause groundwater pollution and other problems — the industry is investing here as though it will be impeded only by market conditions. And it is doing its best to make the business economical.
Company man
Seneca Resources, based in Pittsburgh, has been drilling gas wells in Pennsylvania for a century. It’s owned by the National Fuel Gas Co. of Buffalo, whose utility has 733,000 retail gas customers in western New York and northwestern Pennsylvania.
Seneca’s drilling experience was confined to developing conventional shallow wells, not the deep shale wells that run laterally underground for a mile or more. After the Marcellus discovery, Seneca teamed with an experienced deep-well driller, EOG Resources, until it developed its own in-house expertise.
Dewberry, 54, whose experience includes working on offshore rigs and in the Middle East, was hired as a Seneca “company man,” the top dog on a well site. Most personnel who work on the well are contractors who report to him.
“This is a proven field now,” said Dewberry, a native of Alabama who got married in Pennsylvania and built a home in Tioga County. “We know what we’ve got and we know what we need to do.”
Seneca has mineral rights for 780,000 acres in the Marcellus, but its most productive wells are in 8,891 acres of Loyalsock State Forest that it leased for $28.5 million in 2008 from the Department of Conservation and Natural Resources. It has drilled 40 of 70 wells planned on the land, known as Tract 100.
The advent of “pad-drilling” — multiple wells from a single location — accounts for a lot of the saving. It means the 142-foot-high rigs do not have to be broken down and moved so often. A rig typically costs $50,000 a day to lease.
The process
Three-dimensional seismic imagery has improved the accuracy of drilling — more of the well penetrates the shale, not unproductive rock. Switching from diesel to natural gas to power the rig reduces daily fuel costs from $6,550 to $585, said Robert Boulware, a Seneca spokesman.
On a recent visit to the site, when it was so misty the top of the derrick was shrouded in vapor, the rig crew rapidly lowered lengths of 13 3/8-inch-diameter steel pipe into a hole that had been drilled overnight to a depth of 750 feet. Cement would be pumped into the void between the rock and the steel casing to seal the well from the freshwater aquifer. Then drilling would resume, with progressively smaller drill bits and narrower steel casing until the bottom of the well is reached.
Seneca expects rigs to drill 1,200 feet per day in Tract 100 in 2013, nearly twice as fast as in 2012.
After all the wells are drilled, they will be hydraulically fractured in sequence. Seneca and other producers have installed networks of pipes to carry fresh water for hydraulic fracturing, eliminating thousands of truck deliveries for a process that can require millions of gallons per well.
Seneca says improvements in the last year alone saved about $525,000 per well in Tract 100. Its break-even point for these wells is $2.20 per 1,000 cubic feet of natural gas. The market price is nearly $4, so these are very profitable wells.
A single pad with top-performing wells might produce as much gas as Seneca’s 3,000 existing shallow wells in Pennsylvania, Boulware said. The Marcellus represents a quantum leap for the company.
“That speaks to the efficiency,” he said. “Now you’re able to get that same production, the same sales, out of one pad.”