Oil, gas upswing energizing region

March 28, 2017
Jim McNutt/Observer-Reporter Exterior of the Observer-Reporter building in Washington.

Rebounding isn’t particular only to elite basketball teams and pleasant temperatures this spring. The natural gas and oil industry appears to be in a rebounding mode as well.

Following 2 1/2 years of suppressed market prices and commodity demand, the industry appears to be on an upswing throughout Southwestern Pennsylvania. Optimism among drilling companies and their supply-chain partners isn’t as abundant as the natural resources available in the Marcellus and Utica shale plays, but it is palpable following a lengthy hiatus.

As Dennis Degner, a vice president with Range Resources, told business editor Michael Bradwell in Sunday’s installment of the Observer-Reporter’s “Peaks & Valleys” series: “I’d say the turnaround is already here. The uptick is happening now.”

That is a positive prospect for shale-related companies and thousands of consumers benefiting from lower utility bills. Yet it is a tempered optimism. Drillers, attorneys and analysts in particular don’t envision the level of prosperity experienced in the 10 years after the first natural gas well was drilled in Pennsylvania – Renz No. 1 in Mt. Pleasant Township, by Range Resources, in October 2004.

At the beginning, gas from the Appalachian Basin sold for $12 to $13 per 1,000 cubic feet, a bonanza for production companies. The price remained healthy until it plummeted in the fourth quarter of 2014 and continued to languish in the doldrums, forcing many firms to cut back or halt drilling. But that rate has picked up in recent months to about $3 per mcf, and closed the gap with national prices from about $1 mcf to 60 cents. Many believe the regional upturn will be steady and sustainable for years.

This is occurring at a favorable time for this corner of the commonwealth. Sunoco Logistics has gotten the go-ahead to build the Mariner East 2 pipeline, stretching 300 miles from the MarkWest natural gas processing plant in Chartiers Township east to the Marcus Hook industrial complex near Philadelphia. It will be parallel to the existing Mariner East 1 to the north.

Limited pipeline infrastructure makes it difficult to distribute the resource, resulting in a glut of unused natural gas and depressed prices. Mariner 2, when completed, will move the gas across Pennsylvania’s southern tier to Marcus Hook, which will then ship it to markets in the Northeast and Europe.

The Shell Chemical cracker plant, under construction in Beaver County, also should be a boon to this region. Ethane, from “wet gas” in the Marcellus and Utica formations, will be processed there to make ethylene, feedstock for the plastics and chemical industries. Most of Greene County and the section of Washington County south of Interstate 70 are considered prime wet gas areas.

Some oil and gas companies left the area or struggled during the downturn, and some survived. They include Range, CONSOL Energy, Rice Energy and EQT, all of whom have increased their 2017 capital spending budgets.

Although it is accompanied by a measure of caution, optimism does abound within the industry again.

Near-bust may not give way to a second boom, but the regional energy outlook is exceedingly brighter.

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