An over-abundance of oil and gas
Never before has there been so much available oil and natural gas supply in the world.
Back in the days of President Jimmy Carter, I remember sitting 鈥� or rather, pushing my 鈥�66 Mustang 鈥� in a long gas line at my local filling station so I could fill up with enough gasoline to drive back to college.
I had about a half-tank of gas, but had to act as if I had no gas because the attendants were going to shut down the line a few cars ahead of me. My buddy and I realized what was about to occur, so I turned off the motor and we jumped out of the car to push it to the dispenser. The attendant saw us and assumed we were out of gas, so he kindly put the 鈥渃losed鈥� sign on the back of my car. It was a bit embarrassing not to need the full eight gallons of rationed gas 鈥� but I needed a full tank to drive to college the next day.
Back then, we were led to believe by petroleum experts and the government that we were going to run out of oil within a couple generations and we were encouraged to conserve oil and gas 鈥� and find alternative fuels. Much has happened in the petroleum industry since those days 鈥� the most significant technological advance, of course, being fracking.
Today, the world is awash with oil and gas. The price of oil per barrel is around $30. The price per Mcf, or 1,000 cubic-foot unit, of natural gas is about $2.25, down from about $6 per Mcf in early 2014.
And since the commodity price is so low, many companies are forced to cut oil and gas production.
The Intelligencer and Wheeling News-Register recently reported that a single Ohio County Marcellus Shale well yielded enough natural gas in 2014 to provide electricity for 24,315 homes. Plus, a well in Ohio produced 45,260 barrels of oil 2014.
According to the West Virginia Geological and Economic Survey, an arm of the Department of Commerce, West Virginia produced more than one trillion cubic feet of natural gas and drillers extracted more than 8.3 million barrels of natural gas liquids (consisting of ethane, propane, butane, pentanes and other liquids) in 2014.
Oil production in West Virginia has increased from about 27,000 barrels in 2009 to 5.2 million barrels produced in 2014.
And this is just the beginning of what is available in the potential Marcellus wells in West Virginia. 鈥淭he thing is, we鈥檝e probably only permitted about five percent of the potential Marcellus wells in West Virginia,鈥� said Corky Demarco, executive director of the West Virginia Oil and Natural Gas Association.
In the past year, the state of West Virginia leased drilling rights below state wildlife management areas and waterways, including beneath the Ohio River.
The upfront lease fees totaled $18 million, with the bulk of the money earmarked for Division of Natural Resources projects and wildlife management.
In addition, the state earns royalties of 20 percent of oil and gas extracted from the properties.
The leases do not permit drilling on the land surface of these state owned properties, but they do allow drilling on privately owned adjoining properties, which horizontally extract the oil and gas from the state owned properties. Because the price of oil and gas is so inexpensive, none of the leases which the state signed are extracting the minerals. It蘑菇视频 in everyone蘑菇视频 best interests for the prices to go up so it makes sense to drill.
Many mineral owners would rather leave the gas and oil in the ground and wait until the price comes back up. But, some companies are contractually bound to drill in order to hold leases.
Notwithstanding the current glut of oil and gas, many business leaders are optimistic over the long term for the increased demand for natural gas.
鈥淓veryone knows that these prices are temporarily low,鈥� said Matthew Graham, President of Gratec Industries, an Oklahoma-based company that sells dual fuel compressed natural gas conversion kits for trucks. 鈥淣otwithstanding the low prices of diesel fuel and gasoline, our CNG conversion kit business continues to grow.
Sales for our dual fuel conversion kits have been strong for large fleets seeking to gain government grants and tax incentives, and we are seeing an increase in sales to green-oriented businesses. Our customers are seeing significant savings in fuel costs, maintenance costs and fuel efficiency.鈥�
David Pearl is Vice President of Infinity Resource Group, Inc., a professional mineral rights consulting firm, specializing in the leasing and sale of mineral rights in PA, WV and OH. He is also managing director of a natural gas fuel dispensing patent holding company and director of a natural gas fuel island development company. Your questions are welcomed by calling 412-535-9200 or by emailing IRGOilGas@gmail.com.