MARCELLUS GROWTH NOT PEAKING ANY TIME SOON
fuelfix.com - March 3, 2014 at 12:40 pm by Ryan Holeywell
HOUSTON — Natural gas from the booming Marcellus Shale will represent nearly a quarter of U.S. production by 2015, according to a new report published Monday by investment analyst Morningstar.
The report estimates that the Marcellus Shale, which traverses the Northeast from New York to West Virginia, will be the biggest driver of domestic dry gas production growth in the coming years, adding 3 billion cubic feet per day this year and another 2 billion cubic feed per day in 2015.
At that point, the report says, Marcellus gas will account for nearly a quarter of the country’s gas production, up from about 20 percent today.
“In short,” the Morningstar report says, “the growth of the Marcellus over the next several years is likely to be nothing short of astounding.”
No peak anytime soon
According to the Energy Information Administration, dry gas production in the Marcellus Shale averaged 10.4 billion cubic feet per day in 2013 — a 61 percent increase from 2012.
Pad drilling: New technologies require new math for rig counts
The report says the strong growth — which forecasts historically have underestimated forecasters — is due largely to efficiency improvements like a shift towards pad drilling and 24-hour operations.
“For a variety of reasons — including the high initial production rates and relatively shallow declines of wells, the ongoing application of new technologies, and a continued focus on more productive areas of the play — we don’t believe Marcellus natural gas production will reverse course anytime soon,” the report says.
1,600 wells
The report indicated at least 1,000 wells will need to be completed annually to hold production in the formation flat. But the Morningstar forecasters estimate 1,600 wells will be completed each year, with the extra production more than compensating for declines from older wells.
The play has 30 to 75 years of resource potential at current production rates, according to the study. While growth is likely to slow down, the play is so large — it covers nearly 100,000 square miles — that even slight growth will be significant.
The report was based on an analysis of nearly 4,500 wells in Pennsylvania and 1,000 wells in West Virginia, according to Morningstar. Researchers examined their initial production rates, production declines and drilling and completion activity to conduct their analysis.
Ryan Holeywell covers energy for the Houston Chronicle. He previously wrote about transportation and municipal finance for Governing magazine, which is read by state and local government officials nationwide. Holeywell’s previous work has been published by the Washington Post and USA Today, and he has appeared on CNN and public radio to discuss his articles. Holeywell, a Houston native, graduated from George Washington University in Washington, D.C.
Views: 1029
Replies to This Discussion
-
Permalink Reply by tc on
-
The good thing for NG prices in the short term is that you can't wave a magic wand and instantly build the thousands of miles of pipelines that are needed to move all this new gas.
There is also another political aspect the report may be missing. The current PA Governor is very pro NG and when he passed recent drilling laws he took away local governments rights to zone drilling (overturn by the State Supreme Court this year) and PA is the only state with meaningful energy production that has no severance tax. However the governor is up for reelection this fall and his numbers are low and many of his challengers are pro severance tax. So a new severance tax and the current price differential between Marcellus and Henry Hub could slow NG production.
-
Permalink Reply by Skip Peel - Mineral Consultant on
-
Agreed. However the same wand can not speed up arrival of LNG export in the volume required to move prices. Reports of pipeline connection from Marcellus to the Gulf Coast have been circulating for several months now. Marcellus gas could reach LNG exporters by the time most of the planned and approved capacity comes on line. Although I don't keep up with the political winds in the Marcellus states it appears from Internet reports that the majority of land/mineral owners and the general public are in favor of development and not put off by the manufactured fracking controversy. I would not expect any change in PA laws even with a different governor. As is usual with this kind of issue the vocal minority garners the bulk of media attention. And the media either does a poor job of reporting out of ignorance or ignores the facts to accentuate the controversial.
-
Permalink Reply by 1kw6x71km1v37 on
-
It is quite possible significant quantities of both Marcellus and Gulf Coast gas will eventually go to Europe for consumption. Only Vlad Putin knows for sure.
-
Permalink Reply by Skip Peel - Mineral Consultant on
-
LNG and oil are not just energy sources, they are potential political tools. Exports to Western Europe would largely degrade if not eliminate their reliance on Russian supply. Could be a game changer in dealing with an increasingly aggressive Russian regime.
-
-
The downside to this scenario is that when Russia is not acting badly they can supply Europe with NG much more cheaply than US LNG and the US is left with a supply glut. Being a swing producer is much easier when your are a country like Saudi Arabia, with nationalized energy, than the US with fragmented capitalistic energy producers.
-
-
just ask the ukrainians about energy used as blackmail. more than once in the past, gazprom has called them up in the midst of a brutal winter to say ' never mind the terms of our existing long term contract, let's now discuss the new, higher price of the gas we will sell you going forward'.
the ruskies are well versed in all forms of double dealing and dirty tricks. and, the w. european nations aren't unaware of gazprom's tricks either. they've lusted after access to us lng supplies ever since they began to appreciate the impact/magnitude of our shale production bonanza. they know that we'd never 'pull a gazprom' on them
maybe, the current crisis in ukraine will lead to the approval of more liquification export terminals being given the ok by the ferc.
and, maybe, just maybe, it might improve the current, poor odds that washington will give an ok to the northern portion of the keystone xl pipeline.
-
-
"they've lusted after access to us lng supplies"
But access doesn't equal buying. The capitalistic European companies will play us against the Russians for the lowest NG prices. Since Russia "can" be a low cost provider to Europe, this is a price war that is bad for US NG producers. Until Europe signs long term contracts for more expensive LNG, I say lets not get supply more ahead of potential demand.
-
-
tc,
your point is well taken. if i was france, let's say, i'd do the same and try to play our lng against their siberian gas.
from an energy security point of view, imo, they'd be crazy to not diversify supplies a bit. just as we won't be selling lng to just one market, it'll be spread about.
it's my understanding there's a world price for lng. i believe currently, landed, it's around $15/MMBtu. since it'll cost a bit more to get gom lng to asian markets than to european ones. one could choose to accept a lower delivered price in europe yet still achieve a higher netback than by selling to the asians due to the transportation differential.
jim
p.s.fwiw, two entities split 50/50 the lng export capacity of my ex employer's cove point, md lng export terminal. the companies are a us sub of sumitomo and the us sub of gail (an indian concern)
-
-
Jim, they heard your pleas.
On Tuesday, House Speaker John Boehner called for the Energy Department to speed up approvals of more LNG projects so that more U.S. gas could find its way to Europe.
The bad news.
Several industry officials said they do not see a convergence of the cheap price paid in the U.S. of less than $5 per million Btu with $15 or higher paid in some parts of Asia. Still, they do see some price advantages for Asia as new supply from the U.S. and elsewhere hits the market in the next few years. IHS, in its own study, found that gas prices should average $4 to $5 annually for the next 20 years, even with occasional spikes.
http://www.cnbc.com/id/101470274?__source=yahoo%257cfinance%257chea...
-
-
tc,
thanks for the post.fwiw,i agree with the ihs price assessment. imo, the spread between the us price and the world lng price, once transport and liquification costs are netted out will be gravy for the parties in the middle.
jim
-
Permalink Reply by ATLGator on -
All I keep hearing about from these agencies, i.e. EIA and IHS, is that we'll have sub $5 gas for the next couple of decades.
What I'm having a hard time reconciling is this...
I have listened to the following conference calls for this past earning season: UPL, CHK, ECA. Not one of them mentions drilling for dry gas at these levels, quite the opposite actually. I've also heard from other sources that Shell, XOM, and other big boys are reducing capex for dry gas. Where is all of this production going to come from to match demand?
I'm not buying it... Prices must rise to at least the $5.50-$6 range in my estimation to compete with the liquids plays for capex.
-
Permalink Reply by Skip Peel - Mineral Consultant on
-
Much of the growth in dry gas production is coming from the Marcellus and the Utica shales. If you look at the footprint of the Marcellus on a map, it is huge. Ten times or more than the Haynesville as a guess. It took about 4 years to HBP the Haynesville. It will take much longer to do so with the Marcellus. The price of natural gas, not matter how low it may go, will not have an effect. There is currently reports of plans to bring Marcellus gas to markets on the Gulf Coast. Also established plays in development mode that have flared gas are coming under pressure to capture that gas for sale - Eagle Ford and Bakken. States and mineral owners hate the idea of no royalty on flared gas. Operators will be quite willing to commit gas volume delivery to companies looking at the economics of building those pipelines. They'd like to get a return of the gas also.
Support GoHaynesvilleShale.com
Top Content
Blog Posts
The Lithium Connection to Shale Drilling
Shale drilling and lithium extraction are seemingly distinct activities, but there is a growing connection between the two as the world moves towards cleaner energy solutions. While shale drilling primarily targets…
ContinuePosted by Keith Mauck (Site Publisher) on November 20, 2024 at 12:40
Not a member? Get our email.
Groups
-
San Augustine, TX
386 members
-
Miller County, Arkansas
27 members
-
Sabine Parish, LA
455 members
-
South Caddo Parish Group
440 members
-
Natchitoches Parish
400 members
-
Bienville Parish, LA
244 members
-
Fayetteville Shale
149 members
-
North Caddo Parish
358 members
-
Central Texas Gas
63 members
-
Cass County, TX
119 members
© 2024 Created by Keith Mauck (Site Publisher).
Powered by
