Curtailments crimp Fayetteville gas output

Southwestern Energy Co., Houston, which has built its Arkansas Fayetteville shale gross operated production to more than 1 bcfd of gas, expects pipeline curtailments that began in April 2009 to continue possibly into 2010.

Aug 2nd, 2009

By OGJ editors
HOUSTON, Aug. 2
– Southwestern Energy Co., Houston, which has built its Arkansas Fayetteville shale gross operated production to more than 1 bcfd of gas, expects pipeline curtailments that began in April 2009 to continue possibly into 2010.

Chesapeake Energy Corp. produces a net 220 MMcfe/d, making it the Fayetteville’s second largest producer. Chesapeake, which operates in four Midcontinent and Appalachian shale plays, is not shutting in Fayetteville production but might later this year and expects that rising pipeline and gathering system pressures likely will result in curtailment across the industry in the next few months.

Starting in April, Texas Gas Transmission reduced capacity on or shut down the Boardwalk Pipeline (Fayetteville lateral) on several occasions due to various activities including maintenance and inspection. These actions and similar repairs to the Greenville lateral are expected to continue, resulting in future curtailments, Southwestern said.

Texas Gas has estimated that it will begin repairs and maintenance on the pipeline in September and that the repairs will be completed in 1-5 months.

Southwestern said its transport capacity for Fayetteville shale production is sufficient for its wells at a gross operated rate of 1.05 bcfd, of which its net share is 750 MMcfd. It estimated that production will be curtailed to 650 MMcfd, or a net 450 MMcfd, once repairs to Fayetteville lateral Phase 1 facilities begin.

Southwestern placed 231 operated horizontal Fayetteville wells on production in the first half of 2009. It is running 13 horizontal rigs and four surface-hole rigs and expects to have drilled 575 wells in 2009 averaging 4,123-ft laterals and $2.9 million/well.

Chesapeake is producing 240 MMcfe/d net or 325 MMcfe/d gross operated from the Fayetteville and hopes to reach 300 MMcfe/d net and 400 MMcfe/d gross operated by the end of 2009 and 375 MMcfe/d net and 500 MMcfe.d gross operated by the end of 2010.

With 440,000 net acres, it plans to average 18 rigs in the second half of 2009 and 16 in 2010 to drill 80 and 149 net wells, respectively.

In the first half of 2009, Chesapeake’s partner BP America Inc. paid $337 million of Chesapeake’s Fayetteville drilling costs. BP America will pay $300 million or nearly all of Chesapeake’s drilling costs in the 2009 second half.

Chesapeake increased its targeted estimated ultimate recovery in the Fayetteville to 2.4 bcfe/well from 2.2 bcfe. The company has more than recouped its entire $525 million investment in Fayetteville leasehold by selling a 25% interest to BP America for $883 million.

The Fayetteville shale is the country’s second most productive shale play and one of the 10 largest gas fields of any type, Chesapeake said.

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