Simple Primer on Wet Gas and How It Relates To the Bakken

From the beginning, I have tried to avoid blogging about natural gas. I had enough trouble understanding the oil business and the Bakken, and it goes without saying that I had no clue about natural gas. But, every so often I would post something about natural gas. The subject came up again in this month's Director's Cut.

"Anon 1" provided a nice comment to that posting which sheds more light on the subject at that post. At risk of misstating / miswriting the comment here goes:

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Liquids are NGLs - propane, for example,  in the gas.

"Liquid rich" is the new buzz word.

When "dry" natural gas is priced at $2 (the number we see on the crawler all day long at CNBC), it is the accompanying liquids that make the money for the operator, not the dry natural gas.

Gas is measured in BTU. 1200 BTU/MCF is rich. The Bakken is 1500 BTU (+/-). [Note: sometimes liquids are stated in barrels per MMCF; MM = thousand thousand --> million. 25 bbls/mmcf is "good."]

[This explains how Chesapeake and others can make money in natural gas fields like the Utica or Marcellus when natural gas is selling for $2 and all the talking heads say $2 natural gas is not economical. This also explains what ONEOK saw when it decided to build those three or four natural gas gathering and processing plants in the Bakken.]

The Utica ...
http://files.shareholder.com/downloads/EVEP/1861885577x0x571305/792299d3-6ef4-40da-a577-1e5bf476f5ef/NAPTP%202012.pdf

On page 14 of that linked PDF, it is stated that the Utica has condensate averaging 25 to 175 bbls/mmcf; and, the natural gas liquids average 120 to 160 bbls/mmcf (note again: 25 bbls/mmcf is good).

"Anon 1" says: see page 16 for Utica processing plants. There is much more just east of there for the Marcellus.

Prepare for the liquid flood.

CHK: "CHK’s best Utica well, the Buell 8H in Harrison County, OH, had an IP rate of 3,000 boe/d in September, 2011, with roughly half the production from liquids. The Buell well is currently producing 1,040 boe/d, and CHK believes the well will have an EUR of at least 575,000 bbls of liquids and 13 bcf of natural gas."

CHK: "On a post-processing basis, peak rates from wet gas window have averaged ~415 bbls/d of oil, 260 bbls/d of NGLs and 3.9 mmcf/d of natural gas, or ~1,325 boe/d."

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My hunch is that RBN Energy has provided the same information in the past in as easily understandable words, but, if so, I missed it. The above may be the best explanation I have seen. I know I have posted similar information before, but maybe this time I will remember/understand it.

From an earlier comment from Don, it is my understanding that natural gas liquids are returning about $8 for wet gas vs the $2 we see for dry natural gas.

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So these are the takeaways:

• the talking heads on CNBC have not yet talked about how natural gas companies can still make money in natural gas fields (they can if the if the fields are rich in wet gas)
• there may not be a lot of natural gas in the Bakken compared to oil, but what natural gas there is, it is rich, around 25 bbls/mmcf
• fields like the Utica and Marcellus are extremely rich in wet gas
• we should start seeing more stories on wet gas in the near future

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The above information should help those who receive royalty payments to better understand their statements. Question 38 from FAQs.

"O" for oil. "G" for natural gas. "P" for plant products.  As the gas is processed and purified for transportation, by products like natural gas condensate, sulfur, ethane, and natural gas liquids like butane, propane, isobutane, and pentanes are produced and sold. Source. On some royalty checks "P" will be abbreviated at "PPROD." The Bakken Shale Discussion Group has a nice discussion on "plant products."