US: High natural gas prices driving up well drilling in northwestern Pa.
Gas prices, and the demand for permits, have been increasing steadily for about the past five years.
In March 2003, the Department of Environmental Protection issued 233 drilling permits for the 12-county northwestern Pennsylvania area _ a monthly record that stood until 240 permits were issued in March. In the first four months of this year, 580 permits have been issued. Last year 609 permits were issued in the first four months.
By comparison, 225 permits were issued in the first four months of 1999.
"I don't think we can be any busier. There's not the equipment out there to drill any faster," said Paul Kucsma, DEP's northwest regional manager of oil and gas monitoring and compliance. "There just are not any more rigs available."
Industry officials are stopping short of calling the situation a boom, however, saying that higher steel prices have driven up the cost of drilling _ keeping profits from climbing as high as some drillers might like.
"The increased demand for natural gas is reflected in the increased price we've seen over the past couple of years, and that's reflected in the drilling activity," said Steve Rhoads, executive director of the Pennsylvania Oil and Gas Association. "There's good cash flow for the producers, but I wouldn't call it a boom."
Gas formations in northwestern Pennsylvania are generally reached by drilling 2,500 to 6,000 feet deep. The rule of thumb is a commercial well would cost $40 per foot to drill and about $160,000 on average to complete. But those numbers are in flux because of rising steel prices.
"The higher prices for gas have definitely helped, but they have not been a total windfall because of the higher prices for pipe driven by steel prices," said John Sturgill of Kastle Resources, an Edinboro gas exploration company.
Still, the relatively high price for gas at the wellhead _ $5.50 per cubit foot on average in Pennsylvania _ is giving companies reason to drill.
"We're re-evaluating our lease holdings in Erie County on that basis and our intentions now are to drill 10 to 15 new wells in the county in 2004," said Stephen Mills, president of Vineyard Oil and Gas in North East, Pa. The company will drill on a field whose prospects didn't make drilling worthwhile seven or eight years, Mills said.
Bob Brace, who has a small gas production company along Route 97 near his farm, recently drilled four new wells.
"We drilled our first wells in 1978. It was going good, but then for about 10 or 12 years it didn't pay to drill," Brace said. "When prices started to get a little better three or four years ago we began looking at it again and now we've drilled some more wells."
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