National Fuel Gas Co.’s natural gas production in Pennsylvania keeps growing by leaps and bounds.
The Amherst-based energy company said Tuesday that it expects its oil and natural gas production during the fiscal year that began this month to be nearly 11 percent higher than it forecast just three months ago, largely because of rapid growth in its drilling program in the Marcellus Shale region in Pennsylvania.
The strengthened production forecast stems mainly from the company reducing the time it takes to drill new wells and bring the natural gas they produce to market, along with improved productivity from its drilling program and a slower drop-off in production at some of its existing wells, the company said. Marcellus wells tend to produce gas at prolific rates during their first two years, but then their output typically steadily declines.
National Fuel said its oil and natural gas production jumped by 45 percent during the fiscal year that ended Sept. 30, which was in line with the increased forecast that it issued in late July. The company said that it expects its production this year to rise by anywhere from 20 percent to 37 percent.
Ronald J. Tanski, National Fuel’s president and CEO, said the company’s oil and gas drilling business had an “outstanding year,” with the results from its drilling program leading to a 31 percent increase in its natural gas reserves.
“We achieved tremendous growth in both production and proven reserves,” he said.
Although National Fuel has slowed the pace of its drilling program from the accelerated schedule it envisioned two years ago as natural gas prices have dropped below $4 per 1,000 cubic feet, the company’s overall production still has been increasing rapidly. Because of the low natural gas prices, National Fuel said that it curtailed its fourth-quarter output by about 10 percent.
Natural gas production in Pennsylvania has been soaring because of horizontal drilling and hydraulic fracturing, or “fracking,” a controversial drilling technique that critics say threatens to contaminate water supplies and damage the environment, while supporters contend that it is safe.
National Fuel said that its 45 percent jump in oil and natural gas production in the latest fiscal year was the equivalent of 120.7 billion cubic feet of gas. The company said that it expects its output this year to rise to between 145 billion and 165 billion cubic feet, up from its earlier forecast of 134 billion to 146 billion cubic feet.
Most of the increase, including a 35 percent rise in production during the summer, came from prolific new wells the company drilled in Lycoming County in north-central Pennsylvania. The company’s production of crude oil rose by 2 percent, as output from some of its California oil wells continues to be limited by pipeline constraints that are expected to be resolved by the end of January.
National Fuel controls about 780,000 acres of land across the Marcellus Shale region in Pennsylvania where it has the rights to drill. So far, most of its activity has been centered on land it leases on the eastern portion of its holdings, but the company also has been drilling a smattering of wells to measure the potential of its western acreage.
The company also tested a well during the fourth quarter in McKean County that drilled across more than a mile of the Utica Shale, another shale formation below the Marcellus that has been shown to hold increasing promise as another source of vast amounts of natural gas. The Utica Shale well that National Fuel tested in McKean County had a peak 24-hour production rate of 8.5 million cubic feet per day and averaged 6.8 million cubic feet over a week. That’s in line with some of the exploratory Marcellus wells that the company drilled last year in the western portion of its acreage.
National Fuel’s report came on the same day that the federal Energy Information Administration said natural gas production from the Marcellus Shale region is growing faster than expected and has now reached 12 billion cubic feet a day. That’s the energy equivalent of about 2 million barrels of oil a day, and more than six times the 2009 production rate.
The vast majority of the Marcellus gas is coming from Pennsylvania and West Virginia. The shale also lies under other states, but most of the wells in Ohio produce oil, and New York has a moratorium on shale gas drilling.