Pennsylvania’s natural gas industry’s production grew more than in any other state in 2021, according to a recent report by the state’s Independent Fiscal Office (IFO).
Though consistently growing since 2012, a multiyear decline in growth of natural gas production volume for Pennsylvania’s wells is reversing. The downward trend in growth began in the third quarter of 2018. Since then, growth in production has dropped quarter by quarter, bottoming out in the third quarter of 2020, which saw just a 2.9 percent increase in production from the previous quarter. In the fourth quarter of 2019, the quarter before the start of the pandemic, PA gas production grew by 6.8 percent, eventually falling to 3.3 and 2.9 percent growth in the first two quarters of 2020 respectively. As COVID became pandemic, and lockdowns were enacted, demand dropped and gas drillers cut production in order to profitably continue to operate. In the first three quarters of 2020, growth in production hovered around 3 percent in each quarter.
The downward trend and stagnation began to reverse in 2021. According to the IFO report, production grew by 5.4 percent in Q1 of 2021 and continued to rise in Q2 with an additional 7.8 percent growth, eventually falling to a 6.7 percent growth rate in the third quarter of 2021. Though it has dropped below pre-pandemic levels, these rates are the highest among natural gas-producing states in the country. Pennsylvania saw an overall production growth rate of 7.9 percent in 2021, outpacing West Virginia’s 6.7 percent growth, and toppling Texas’ 0.1 percent. Texas led the country in overall production volume in 2021, with Pennsylvania following in second.
Within the Commonwealth, Susquehanna topped all other counties in horizontal well production volume, followed by Washington, Bradford, Greene, and Lycoming County. As in the interstate comparison, though Susquehanna led in production volume, the county’s year-over-year production from 2020 to 2021 fell by one percent. The top growth in terms of production volume came from Washington and Bradford counties. Total production from Washington County grew 16.3 percent in 2021, accounting for 18.4 percent of the state’s total horizontal well production. Bradford County overshadowed Washington’s growth at 21.8 percent, totaling 15.3 percent of the state’s production volume.
The report also discusses price trends for natural gas at the Henry Hub and PA weighted averages. Prices both at the Henry Hub and in PA specifically fell in the first quarter of 2020. PA prices continued to fall through Q2, but prices at the Henry Hub began to rebound in that same time. The last two quarters of 2020 showed growing prices in both markets. In 2021, prices in both markets began climbing by double-digit percentages. In Q1 of 2021, gas at the Henry Hub reached $3.44/MMBtu, an 83.4 percent growth rate, and PA averages grew by 64.4 percent, reaching $2.53/MMBtu. This trend continued throughout the year, with Q4 prices arriving at $4.74/MMBtu at the Henry Hub and $3.97 for the PA weighted average.
The conflict in Europe has created a lot of uncertainty regarding the future of America’s natural gas industry and prices. The desires of many European nations to abandon Russian natural gas sources and changing attitudes in the White House regarding natural gas, such as the creation of the Task Force for Energy Security (TFES), will certainly impact domestic production and markets, especially in the Marcellus shale region. How much of an impact and whether or not the agreements made in the TFES will be upheld is yet to be seen.