The Marcellus Shale Gas Boom Evolves

Abstract

Marcellus Shale Gas The Rise in Marcellus Liquids Ever since its pioneer Renz No. 1 well, recompleted to target the Marcellus shale in October 2004, Range Resources has led trends in the play’s activity. If this holds true, the Marcellus is in for a surge in liquids-rich development. The company says it is devoting 79% of its 2013 USD-1.3-billion capital budget toward development drilling in the Marcellus shale region. A total of 85% of this spending is being directed toward liquid areas, and 82% of the budget is focused on drilling. Range states that the “large, liquids-rich window in southwestern Pennsylvania” is the reason “the Marcellus offers the best economics of any large-scale, repeatable play in the country.” The company’s exploitation of this liquids-rich area is well under way. During the first 6 months of 2012, Range produced most of the unconventional gas condensate in Pennsylvania—566,631 bbl—all in Washington County. It almost doubled that production in the latter half of 2012, with 1.1 million bbl, again all in Washington County. Range has worked steadily over the past 9 years to define the productive limits of the Marcellus. The company believes the industry has achieved this goal through drilling approximately 1,650 wells (1,150 horizontal and 500 vertical). Range says it has drilled 570 wells (511 horizontal and 59 vertical) in the southwest portion of the play. About 110,000 acres of Range’s position in southwest Pennsylvania is prospective for what it calls “super-rich” Marcellus, 220,000 acres for wet gas, and 210,000 acres for dry gas. Only a handful of other companies have met with success when drilling for Pennsylvania Marcellus liquids—and most production has been moderate to negligible. These include Shell (through SWEPI LLC), Chevron, and ExxonMobil (through XTO), as well as a sprinkling of smaller companies like R.E. Gas Development (a subsidiary of Rex Energy), BLX Inc., Triana Energy, and Northeast Natural Energy. The liquids-rich play is growing in activity in northern West Virginia, with several operators such as Chesapeake, EQT, Stone Energy, Anterro, and Gasstar expanding drilling efforts there. Sustaining Dry Gas Production: Learning By Doing Faced with a glut in the US of dry natural gas that keeps Henry Hub Natural Gas Spot prices hovering around USD 3.63/MMBtu, there is a general trend throughout the country away from dry natural gas drilling to liquids-rich plays. And while liquids exploitation is enticing because they command higher prices, they also represent a challenging logistical conundrum. Infrastructure must be in place to transport and process the liquids.