As natural gas prices threaten to punch down through a decade-old low, producers increasingly focus on areas that yield the high-value natural gas liquids along with methane.
A good part of West Virginia's Marcellus shale acreage remains appealing under those conditions.
"In West Virginia the wet gas is mainly west of Interstate 79," West Virginia Oil and Natural Gas Executive Director Nicholas "Corky" DeMarco. "There is a sweet spot north of Route 33 generally" — an east-west route through Point Pleasant, Spencer, Glenville and Weston.
Gas prices took a plunge in recent weeks.
It was only mid-2008 that spot prices for natural gas were well over $13 per million British thermal units, or mmBtu, according to the U.S. Energy Information Administration.
The shale boom since brought them down to where, in April 2011, the EIA forecast an average Henry Hub price of $4.48/ mmBtu for 2011. Foreseeing an upward trend, the agency predicted $5 in 2016 and $6 in 2020.
But not so fast. As it turned out, the average price for 2011 was just $4. And with this warm winter, prices have gone lower still.
Platts energy analysts are tweeting the downhill slide. From Dec. 19: "NYMEX February gas futures settle 15 cents lower at $2.322/MMBtu, its eighth straight session with a weaker settle."
The last time the Henry Hub dipped that low for any sustained period was February 2002, almost 10 years ago.
Structural shifts for a demand-side price response are in play: a growing switch from coal to natural gas in power generation, infrastructure that will support natural gas–powered vehicles in fleets, exports of liquefied natural gas.
But those take time.
To keep their efforts profitable, producers increasingly target the "wet" gas regions — those areas that produce, along with methane, the higher-value natural gas liquids including the ethane that would feed a multibillion-dollar cracker plant — and will likely concentrate their efforts even further.
"Those guys in northeast Pennsylvania that are drilling in the dry gas aren't going to be able to continue," DeMarco said.
"The areas which will be drilled and drilled with a ferocity are going to be those areas that you can market the hydrocarbons (natural gas liquids) along with the natural gas," he said.
The Utica shale is wet gas in eastern Ohio and turns to oil further west, he said, toward the center of the state.
Drier areas will still minimum drilling.
"Companies are going to drill what it's going to take to hold their acreage," DeMarco said. "But these low prices are probably going to be driving the activity westward, generally."
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