Appalachian Independent Producers Approach to Marketing Gas: Idealism vs. Reality--a Case Study

Michael C. Linn

The "good old days" of drilling a well and tying it into the nearest pipeline are gone. To survive, the producer must become acquainted with the transportation tariffs and issues unique to each pipeline as well as governmental regulations concerning transportation.

The new marketplace dictates lower prices through the development of new marketing techniques and transportation policies. This environment has created a new means of doing business through the "spot" market. It has become routine for an end user to purchase a 30-day supply of gas from a Gulf Coast producer and enter into transportation contracts with interstate pipelines and his local utility company, thereby saving considerable sums of money at the burner tip. The end user knows that natural gas has become an openly traded commodity in a highly competitive marketplace.

The Appalachian basin producer must operate within this environment by pursuing industrial end-user markets. We can successfully execute contracts and deliver our gas to small industries that are willing to pay a slightly higher price in order to have a reliable supply. The producer may even choose to blend his gas with other sources to provide a more competitive burner-tip price.

Meridian Exploration Corporation is recognized as being a pioneer in direct gas sales. The company serves as operator for over 850 natural gas and associated oil wells located principally in Pennsylvania and New York. Meridian is moving nearly 80% of its daily gas output to numerous end users. Meridian counts among its customers large volume industries, colleges and universities, apartment complexes, shopping centers, and greenhouses.

AAPG Search and Discovery Article #91031©1988 AAPG Eastern Section, Charleston, West Virginia, 13-16 September 1988.