Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said industry workers will struggle if commodity prices remain low.
WHEELING, W.Va. — Corky DeMarco and Shawn Bennett hope oil and natural gas prices will increase so companies will ramp up their Marcellus and Utica shale drilling operations once again.
There are 15 fewer rigs working in Ohio – and 973 fewer throughout the United States – than at this time last year, according to international oilfield services firm Baker Hughes.
“It could be a lot worse,” said DeMarco, executive director of the West Virginia Oil and Natural Gas Association. “To have only lost four rigs in this downturn, we’re doing well.”
Baker Hughes tracks active drilling rigs across the globe. Compared to May 2014, the company reports four fewer rigs working in the Mountain State, as the count dropped from 25 to 21. Ohio saw a larger loss, with active rigs falling from 39 in May 2014 to 24 now.
“Fewer rigs operating in the state of Ohio means less jobs, less royalties and less revenue for local governments,” said Bennett, executive vice president of the Ohio Oil and Gas Association.
New York Mercantile Exchange prices for natural gas hover around $3 per 1,000 cubic feet. DeMarco said a figure closer to $4 per unit would be needed to help drilling increase again.
He and R. Dennis Xander, president of Denex Petroleum in Buckhannon, W.Va., know some companies are going to struggle until demand increases.
“Drilling is hard to justify. Part of it is actual lack of demand, and part of that is due to lack of infrastructure required to enable our oversupply to access the demand. However, there are several infrastructure projects in progress which will change all that,” Xander said of projects such as the Atlantic Coast Pipeline, Mountain Valley Pipeline, Leach XPress Pipeline and Rover Pipeline.
Bennett said the infrastructure dilemma creates such problems that firms working in the Buckeye State are selling natural gas for about $1.30 less per 1,000 cubic feet below the current NYMEX price. He said the $3.8 billion Dominion Resources Cove Point liquefied natural gas export facility in Maryland, recently granted final approval by the Federal Energy Regulatory Commission, is another positive development.
“We’ve got pipelines to Cove Point, Md. That would be our main distribution place,” DeMarco said. “A lot of times when drilling slows down, that is when you build pipelines. It’s just the way the industry works.”
Baker Hughes shows Pennsylvania now has 46 working rigs, down from 60 in May 2014. North Dakota, home of the Bakken Shale oil boom, saw the number of operational rigs plummet from 174 last year to 79 now.
However, Texas is watching drilling activity fall more dramatically than anywhere else, as the working rig count there dropped from 891 in May 2014 to 373 now.
“Why do you think there are so many Texas license plates in West Virginia?” DeMarco said.
DeMarco said the main concern is that some workers will abandon the industry, which would force officials to train a new workforce once demand rebounds.
“This is pretty specialized work. A lot of people have to go where there is work,” he said.
However, DeMarco, Bennett and Xander believe the downturn is only a temporary setback for the drilling boom.
“You’ll see increasing activity in 2016. By 2017 and 2018, things will be very busy – count on it,” Xander added.
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