More Rigs Drilling In Wet Gas

July 20, 2012

WHEELING - The more ethane, propane, butane and other so-called wet gases that are found in the natural gas, the more likely rigs will be called in to drill for it, as companies continue shifting their operations from Pennsylvania to Ohio and West Virginia.

"Until natural gas prices pick back up again, I think you'll see more rigs moving into that wet area along the Ohio River,"said Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association.

According to the New York Mercantile Exchange, or NYMEX, natural gas prices hovered around $2.80 per 1,000 cubic feet last week, sharply lower than in previous years but up from the near $2 per unit seen earlier this year.

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"There's no doubt, at this point, that companies are looking for the gas with the most hydrocarbons they can find. That is the wet gas - that area is full of liquids up there," DeMarco added, referring to the Northern Panhandle and East Ohio.

"There just is not much incentive to drill in dry gas right now."

Generally, throughout the Marcellus and Utica shale formations, the farther east one drills for gas, the more likely this gas is to be of the dry type. The methane-dominated dry gas does not require much processing, so it is much more ready to be sent to market and used by energy companies such as Columbia Gas and Mountaineer Gas.

As drillers move their operations toward the west, they are more likely to find the liquids-rich wet gas, which includes ethane, propane, butane and pentane, in addition to the dry methane gas. Ethane is the product that would be used to make ethylene at an ethane cracker.

Every month, oilfield services company Baker Hughes Inc. issues a report listing the number of rigs operating in each state. The number in West Virginia is now 27, the same as it was in January. This compares to only 20 rigs working in the state at this time last year, reflecting a 35 percent increase in drilling over the last year.

Ohio, meanwhile, has seen a 50 percent increase in drilling activity since July 2011. There are now 18 rigs working in the Buckeye State, up from just 12 last year.

On the other hand, Pennsylvania has seen the number of rigs working there decline from 115 at this time last year to just 78 this year. Throughout the nation, there are now 1,965 rigs drilling, compared to 1,900 in July 2011.

Chesapeake Energy announced plans earlier this year to shift much of the company's focus from drilling in the methane-dominated dry gas regions in much of Pennsylvania to drilling in the wet gas areas.

For Chesapeake, the move to the wet gas areas seems to be paying dividends. Company information shows that for a typical dry gas well, the company makes an average of $13,000 in revenue per day. However, for a wet gas well, the daily revenue more than doubles to $27,800 per day. Finally, for a "wetter" gas well, such as those found locally, Chesapeake states the company earns an average of $38,800 in revenue every day of production.

DeMarco said this is a a typical average for liquids rich gas compared to dry gas production, noting the phenomenon should continue until natural gas prices recover.

That's good news for local residents who have leased their gas rights, as more drilling means more production and royalty payments. That money could then go to work in the local economy.