Technology, Efficiency, and Midstream Growth Drive Long-Term Future for Marcellus, Utica

Abstract

While the collapse in oil price is reshaping opinions about the North American shale revolution and the outlook for oil producers, natural gas producers in the United States are in a somewhat different position. They have contended with low prices since late 2008 and yet remain in a domestic market with substantial long-term growth potential while soon anticipating access to higher-priced global export markets as low-cost producers. No producing area is more invested in the future of US natural gas than the Marcellus Shale that stretches across much of the Appalachian Basin, with development activities concentrated in Pennsylvania and West Virginia. The Marcellus produces approximately 20% of US gas supplies. And beneath the formation lies the highly prospective Utica Shale, in which drilling and production, especially in eastern Ohio, are getting under way. The near-term outlook is anything but rosy at current natural gas prices ranging below USD 3/Mcf at the wellhead. However, the producers generally have plenty of experience with low prices. With a constant focus on technological innovation and increased efficiency, and the continuing expansion of the midstream network to create more marketing options, the gas industry in the Marcellus and Utica is laying the groundwork for a better future for many decades to come. “I think we’re just really in the beginning of realizing how much potential is actually in the Marcellus and the Utica,” said Jeffrey Daniels, director of the Utica Shale Energy and Environment Laboratory at Ohio State University. Daniels is a professor of Earth sciences at the university and a member of the Ohio Oil & Gas Commission. According to the most recent estimate by the US Energy Information Administration, the Marcellus holds 354 Tcf of proved gas reserves. However, technically recoverable gas reserves, an assessment that does not consider gas prices, have been estimated at 480 Tcf by Terry Engelder, a geosciences professor at Pennsylvania State University.