Why has the pace of natural gas drilling slowed down around Towanda?
Because energy companies have found too much gas — not just in Bradford County, where Towanda is, but also in Colorado, Oklahoma, Texas and other states where natural gas is being extracted from shale rock.
The shale gas boom powered by hydraulic fracturing has drastically increased the supply of natural gas on the domestic market. The result: Over the past few years, the price of natural gas cratered to a ten-year low.
Just look at this chart, which plots the average monthly wellhead price of a thousand cubic feet of natural gas. The chart begins in January 2008, when the first Bradford County well was drilled.
Six months into Bradford County’s drilling boom, natural gas is selling for about $10.80. By 2009, the price drops below $4. It rebounds a bit in 2010, but then the price drops and drops. By spring of 2012, natural gas is selling for below $2.
The next chart shows the number of new wells drilled each month in Bradford County. The falloff begins in November 2011.
During the prime drilling period from December 2009 to November 2011, energy companies were drilling an average of 32 new wells a month in Bradford County. From December 2011 on, the average well count drops to just under 17. Less than ten wells were drilled in both July and August 2012, the last two months for which data are available.
That part is all the basics of supply and demand: The energy industry’s natural response to a supply glut is to slow down production.
But there’s another factor in the decline of drilling near Towanda. The gas Bradford County sits on top of simply isn’t as valuable as what drillers can extract from Western Pennsylvania and Ohio.
Bradford County’s gas is “dry.” That means it’s essentially…gas. There’s methane in it, but not much else.
The gas underneath southwestern Pennsylvania and Ohio, on the other hand, is considered “wet.” In addition to methane, the gas contains compounds like ethane and butane. These “liquid natural gasses” – LNGs for short – can be separated and sold on their own. The LNGs are valuable: Ethane, for instance, is converted into ethelyne in petrochemical processing plants like the facility Shell is considering building in Beaver County. Ethelyne is used to make plastic products. Butane is used as a fuel source, and is also blended into gasoline.
By extracting and selling these LNGs, energy companies can make up for the decreased value of the natural gas they’re extracting. Since Towanda doesn’t sit on top of a “wet” shale play, drillers are currently turning their attention elsewhere.