Gas drilling rigs decline in Pa. and nationwide
Tuesday, March 27, 2012
PITTSBURGH (AP) — The number of gas drilling rigs is declining in Pennsylvania and nationwide, due to a combination of low natural gas prices and renewed interest in oil.
There were 98 drilling rigs in Pennsylvania during the week of March 23, according to Baker Hughes, a company that monitors national counts. That's down from a peak of 116 reached during the summer of 2011. Drilling rigs bore the holes and set pipes, but all wells don't go into production immediately.
Experts said the decline doesn't mean the natural gas boom is over, in Pennsylvania or elsewhere. Now, many companies are investing in pipelines and other distribution facilities.
"Where we're seeing a lot of development is taking that gas to different markets," said Kathryn Klaber, president of the Marcellus Shale Coalition, an industry group.
Klaber added that while the number of rigs drilling in Pennsylvania has declined, companies are shifting to target the more profitable "wet gas," which is used to produce specialty products such as butane and ethane.
The Marcellus Shale, which lies thousands of feet underground, has attracted a rush by major oil companies, who have drilled almost 5,000 new wells in the last five years. The Marcellus covers large parts of Pennsylvania, New York, Ohio and West Virginia.
But as production boomed the wholesale price of natural gas dropped. When the shale drilling boom started in 2008, the average price for a unit of gas was about $8. Lately, it's been about $2.30. The drop has driven a nationwide move towards oil and away from gas wells.
"There is a large shift away from dry gas. There's a big debate whether people can make money at current prices," said Keith Crane, director of the Environment, Energy and Economic Development program at Rand Corporation, a Washington think tank.
Three years ago, only about 200 oil drilling rigs were in operation nationwide. Last week, the number was 1,317.
In the fall of 2008, about 1,600 gas drilling rigs were active nationwide; by last week, the number had dropped to 652.
"It is an industry of boom and bust," Crane said, speaking of both oil and gas.
But Klaber noted that even the slowdown in gas drilling leaves plenty of room for related businesses.
In early March, three companies announced plans for a $1 billion gas pipeline to connect production facilities in northeastern Pennsylvania with markets such as Philadelphia, Baltimore and Washington.
UGI Corp., Inergy Midstream L.P. and Capitol Energy Ventures proposed the 200-mile pipeline. The companies set a completion goal of 2015 but still need regulatory approval.
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