Why the Marcellus Shale (and Utica) Are So Important

Shale gas - Nick Grealy ReportsNick Grealy
Administrator of NaturalGas2.0NoHotAir and ShaleGasInfo Blogs

 

Nick Grealy explains why shale gas near urban areas is so valuable, illustrating for us why the Marcellus Shale (and Utica) are such valuable energy assets.

Laszlo Varro, recently appointed Chief Economist of the IEA is the smartest and funniest guy in the energy room in my opinion, a rare combination in a field known for portentous and pretentious expertise. Over the past few years Laszlo has predicted the oil and gas resource is much larger than any one would dare admit and has also accurately predicted that environmental opposition in the US, not Europe, presents the greater danger. He also predicted that gas would start to replace coal on price even in Asia a couple of years before anyone else dared think it. His insights about the relationship between energy assets and location are, therefore, something to be taken seriously.

Varro noted a few years back that the days are gone when the mere presence of gas meant it would be produced. He uses the example of Titan, a moon of Saturn which has lakes of methane, to say that there are places on earth that will be equally stranded. This is Titan:

Marcellus Shale

But there’s somewhere else only slightly less stranded. The Liard Shale in British Columbia and the Yukon:

Marcellus Shale

The Liard was mentioned here back in 2012:

Really big news from Apache regarding what has been whispered about for most of the past year, a massive discovery in the Liard Basin in British Columbia. Judging from what Apache are saying  this shows the capacity of shale to continually amaze:

One of the energy companies planning a liquefied natural gas terminal at Kitimat announced Thursday “an outstanding” new shale gas discovery, the best in North America, in British Columbia’s remote and largely unexplored Liard Basin.

The find by Apache Corp., one of three partners in the $4.5-billion Kitimat LNG terminal and pipeline proposal, is estimated to contain enough gas in itself to justify doubling the size of the Kitimat terminal. The company is calling it the best and highest quality shale gas reservoir in North America and says its wells are the most prolific in the world, based on the volume of gas three test wells are producing.

Based on the production from those wells, Apache announced it has 48 trillion cubic feet of marketable gas within its Liard Basin properties. By way of comparison, all companies active in the Horn River Basin, one of three other major shale gas basins in B.C., have marketable gas of 78 trillion cubic feet, giving one company alone a natural gas find that is two-thirds the size of the entire Horn Basin.

One well alone produced 21 million cubic feet of gas a day over a 30-day test period.

“This is enormous,” said Gordon Currie, senior oil and gas analyst at Salman Partners. “Those are big, big numbers.”

As I often say, anything over six weeks is ancient history in shale, so almost four years is eons. Gord Currie’s statement over big numbers has long been superseded in nowhere more exotic than Ohio for example:

EQT Corporation (NYSE: EQT) today announced completion of the flow-back operation on its Scotts Run 591340 dry Utica well located in Greene County, Pennsylvania. Last week, EQT Corporation announced the well’s 24-hour deliverability test of 72.9 MMcf per day

Those big, big numbers mean that the Liard may possibly never be produced, even after the resource’s updated size hit the headlines in Canada just this week:

It is Canada’s second-biggest trove of natural gas – and nobody wants it.

A new study has identified an immense shale gas resource straddling the boundaries between the Northwest Territories, Yukon and British Columbia, reviving hope among northern leaders that international energy companies will resume exploration in the remote area despite sizable costs and nagging infrastructure constraints.

The Liard shale gas play could ultimately contain 219 trillion cubic feet of marketable natural gas, according to the research conducted by the National Energy Board, B.C.’s provincial energy regulator and the geological surveys of the Northwest Territories and Yukon. The Northwest Territories portion of the zone is an estimated 44 trillion cubic feet.

The Liard shows what a difference ten years makes. Ten years ago, natural gas production had allegedly peaked in the US.  The head of Exxon Mobil said so in 2005, ironically in the same month the first production in the Barnett Shale started.

Gas production has peaked in North America,” Chief Executive Lee Raymond told reporters at the Reuters Energy Summit.

Asked whether production would continue to decline even if two huge arctic gas pipeline projects were built, Raymond said, “I think that’s a fair statement, unless there’s some huge find that nobody has any idea where it would be.”

The facts are that gas production continues to decline, and will start to decline even more rapidly. By the time we get to that period (2010-2012), we’ll need it badly.

Bang goes that theory.  But back to the Liard, where people are still investing at least tens, if not hundreds, of millions on a resource as stranded as the moons of Saturn. Which is truly bizarre when the reality today is that when the size of the resource is no longer in doubt, it’s not how much or where any longer.  It’s where and when and at what cost: It’s location, location, location.

Natural gas resources are going to be increasingly based on the 3L theory…The technology simply does not yet exist to replace, especially in a crowded urban environment, millions of customers’ demand for heat. Heat and air pumps are unworkable in a city of terraced homes with little outside space, quite apart from where the zero carbon electricity to spark them up might come from.

We’re going to be using gas for sometime to come. How long? Both ExxonMobil’s 2005 prediction and the rapid emergence of shale prove events can change rapidly, and natural gas today must be realistic and clear-sighted even about heat demand.  But with most people’s heating systems lasting 20 years or longer, gas demand isn’t going anywhere at anytime soon.

Editor’s Note: This is another condensed version of one of Nick’s insightful posts from his No Hot Air blog, the full version of which can be read in full here. His point is that the UK has huge shale gas resources under its feet which make LNG imports unnecessary. They are, he says, the “least stranded energy asset on Earth,” because they’re so close to the urban markets that need them, making them extraordinarily valuable. The same can, of course, be said of the Marcellus Shale, which is on the doorstep of the Northeast Megalopolis. The need is too great and economics of the Marcellus Shale and the Utica are just too good not to be developed.

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