Drilling at a seven-year low in North Texas natural gas fields, but booming in state's West and South regions, which offer more liquids such as oil, liquefied gas; oversupply keeping natural gas prices soft

Graziela Medina Shepnick

FORT WORTH, Texas , October 23, 2011 (Associated Press) – Drilling is at a seven-year low in the North Texas natural gas fields. But even as drilling pace slackens in the Barnett Shale, it's booming in other oil and gas fields of Texas such as the Permian Basin of West Texas and the Eagle Ford Shale of South Texas.

The number of active Barnett Shale drilling rigs has fallen to 53, their lowest since June 11, 2004. That's barely more than one-fourth of the peak count of 203 active Barnett rigs on Sept. 5, 2008, the Fort Worth Star-Telegram reported in Sunday's edition (http://bit.ly/p22kJe ).

That fall-off comes even as drilling booms in the long-drilled Permian Basin of West Texas and the newly exploited Eagle Ford Shale in South Texas. Those fields offer more liquids such as oil and liquefied gas, drawing higher prices than the drier Barnett Shale natural gas fields.

The number of rigs working in the 55-county Permian Basin has nearly tripled in less than two years to 395, with 195 rigs drilling in the Eagle Ford Shale.

Across Texas and the nation, oil production is up. That has diverted attention away from the Barnett Shale, which is a drier field with plenty of low-price natural gas but not as much oil, condensate and other petroleum liquids.

"If you look at the drilling rig count for crude oil, compared to natural gas, it gives you a strong visual of what's happening in the industry," Alex Mills, president of the Texas Alliance of Energy Producers, told the Star-Telegram. "There's just an oversupply of natural gas right now, and that has kept gas prices soft. That has made the industry divert the rigs from looking for natural gas to crude oil."

Fort Worth-based drilling contractor Union Drilling Co. has moved most of its Texas rigs from the Barnett Shale to the Permian Basin, chief executive Christopher Strong told the newspaper.

"We had only one rig out of our Texas fleet that was running in West Texas back in early 2010," he said. "Now we have 16 over there and only four running in the Barnett. It's been a huge shift."

Also, restrictive local regulations has discouraged further drilling in the North Texas field, said Julie Wilson, vice president for urban development for Oklahoma City-based Chesapeake Energy, the Barnett's drilling leader. As a result, Chesapeake has let some of its mineral leases expire in northeastern Tarrant County.

Barnett Shale activity peaked when natural gas sold for $13 per million British thermal units. The price has weakened to $3.50 to $4 per million BTUs, and a sustained price of $4.50 to $5 was needed to support Barnett Shale drilling, Watson said.

Should natural gas prices increase again, though, the Barnett rigs could be back, Strong said.

"You just need some higher commodity prices," he said.

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Information from: Fort Worth Star-Telegram, http://www.star-telegram.com

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