WPC '12: US shale gas development shifts from dry to liquids

By Ben DuBose
Online Editor

HOUSTON -- Drilling development plans for US shale plays are rapidly shifting away from dry gas and toward areas rich with natural gas liquids (NGLs), an executive with energy consultancy Purvin & Gertz said on Thursday.

Ken Otto, senior vice president with the company, said the proportion of US rigs directed to natural gas has dropped from near 80% in early 2009 to around 40% at present as the focus turns back to oil.

“This is due to the extremely high spread between US oil and gas prices,” said Mr. Otto, who spoke in a presentation at the IHS World Petrochemical Conference.

Wet shale areas such as the Bakken in North Dakota and Niobrara in Colorado are quickly rising in popularity despite their limited size, Mr. Otto said.

But liquids areas in the vast Marcellus region of the eastern US have also steadily increased in 2010, 2011 and early 2012, he noted.

Shell recently picked a spot in the Marcellus region near Pittsburgh, Pennsylvania, as the site of its upcoming ethylene cracker complex.

On the other end of the spectrum, wet development in the Eagle Ford and Haynesville plays has dropped in recent months, according to Mr. Otto.

Overall, total NGL production from US shale plays is poised to rise by 440 million bpd from 2011 to 2015, he predicted. That’s on top of a 270 million bpd increase, or 15%, from 2008 to 2011.

To handle the growing supply, petrochemical projects such as the one from Shell will be needed to consume the rising supply of feedstocks such as ethane, Mr. Otto said.

“It is absolutely critical that petrochemical plants be equipped to handle ethane,” he said. “We see the greatest growth in ethane, though there will be a lot of growth in all NGL products.”

Significant expansions of NGL pipelines and fractionation capacity will also be needed, Mr. Otto cautioned, but added that many of those projects are already in the works.

On the whole, rising interest in NGLs appears to be sustaining an industry that very easily could have been crippled by the dramatic falloff in US natural gas prices.

“Gas production and projects are continuing to expand in spite of very low gas prices,” Mr. Otto said.

The World Petrochemical Conference, held at the Hilton Americas in downtown Houston, ends on Thursday.

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