Natural gas is natural gas, right?
Not quite. There are two types of gas locked inside Pennsylvania’s Marcellus Shale: “wet gas” and “dry gas.” Here’s the difference, and why it matters:
“Dry gas” is essentially….gas. There’s methane in it, but not much else. The bulk of the natural gas produced in north central and northeast Pennsylvania is dry.
Gas extracted from Marcellus Shale in southwestern Pennsylvania, on the other hand, is considered “wet.” That means in addition to methane, the gas contains compounds like ethane and butane. These “natural gas liquids” – NGLs for short – can be separated and sold on their own. (The market for ethane has gotten a lot of attention in Pennsylvania recently, as Shell weighs building a petrochemical plant in Beaver County that would convert – “crack” – ethane into ethylene, which is used to make plastics.)
The difference between wet and dry gas matters because increased domestic gas production has driven down the price drillers can sell their products for. In spring 2012, natural gas prices hit a 10-year low. Prices have increased since then, mostly due to increased electricity demand caused by summer heat, but natural gas is still relatively cheap, and will remain that way for a long time.
In order to increase profit, drillers are turning their attention to “wet” shale plays, where they can extract ethane and other NGLs in addition to gas. The revenue generated from NGL sales helps offset the low price of natural gas.
The focus on “wet gas” means more new activity in southwest Pennsylvania, and less in the northeast. The Post-Gazette documents the shift here.
The problem with this equation, however, is that so many drillers have decided to focus on wet gas that its price is tanking, too. The Wall Street Journal recently characterized the ethane market as “collapsing,” and energy analysts expect NGLs to sell at low prices for years to come.