Marcellus producers turn to dry gas

OREANDA-NEWS. October 26, 2015. Low NGL prices are spurring more producers in the Marcellus shale to switch from wet to dry gas production in the region as fractionation and transportation costs for liquids in certain areas make those wells less viable.

"We're already seeing in the Northeast the producers we deal with moving to dry gas areas because the NGL netbacks are just not there right now," Kelly Knopp, vice president of marketing for midstream provider Williams, said at the Petrochemical Feedstock Association of the Americas (PFAA) conference in Austin, Texas, Thursday.

Spot ethane prices are down 7.5pc and propane prices are down 51pc from year-ago levels amid a downturn in crude prices. As a result, ethane rejection in the US is estimated to be roughly 600,000 b/d throughout the country. In the Marcellus, where infrastructure constraints may add to costs, some producers are shutting wet gas wells, according to many producers at the conference this week.

"There is a little bit of a decision being made in the interim, with liquids prices being so bad and gas production out of these Utica areas, so you're starting to see activity move from wet areas to dry areas," said Art Cantrell, chief commercial officer of Mainline Energy Partners.

However, new pipelines in the area can be filled quickly once favorable economics return, he said. "There's obviously a big downturn in the amount of drilling now, but the pipelines are full and even the projects subscribed to and approved look like they can be filled rather quickly once the prices turn around."