Marcellus-Utica Shale Unlocks the Northeast Economy

Marcellus-Utica ShaleJim Scherrer
Scherrer Resources, Inc., Exton, Pa

The sheer magnitude of the economic impact of the Marcellus-Utica Shale is overwhelming and is unlocking the Northeast’s potential for rebirth.

Today, the Marcellus‐Utica shale region is producing 17 billion cubic feet of natural gas each day according to the Energy Information Administration. This is the energy equivalent of about 2 million barrels of oil a day, and more than six times the 2009 production rate of natural gas.

Marcellus-Utica Shale

Consider, also, these basic facts regarding the Marcellus-Utica Shale plays:

  • There are about 125 drilling rigs active in the Marcellus-‐Utica shale region according to Baker-­Hughes.
  • The combined Marcellus and Utica formation production has significantly reduced Canadian natural gas imports to the Northeastern US.
  • Flow direction in many Northeast U.S. pipelines has been reversed to supply locally sourced natural gas. Should it fulfill its high estimate, according to the US Department of Energy’s Energy Information Administration and other sources, the Marcellus-­Utica shale region is expected to produce 25 percent of US natural gas production by 2016.
How Did We Get Here?

Though gas producing shale in New York and Pennsylvania has been exploited since 1821, the extent of the producing shale formation was not mapped until the Eastern Gas Shale Project of 1979 (DOE, Morgantown, WV).

Gas-­producing shale is predominantly composed of consolidated clay‐sized particles with a high organic content. Beginning in the Paleozoic era, high subsurface temperatures and pressures converted the organic matter deposited in ancient seas to oil and gas. This oil and gas, created hundreds of millions of years ago, would migrate to conventional petroleum traps or pools, or remain within the shale.

The Marcellus natural gas play is a dynamic and rapidly changing drilling environment. In March 2014, the EIA projected that, due to the latest technology being developed and used at Marcellus, drilling efficiency increased and more natural gas was being pulled from new wells in the Marcellus shale formation than in any other major gas play in the nation.

Worldwide Outlook for Shale Gas

According to British Petroleum’s Annual Energy Outlook Report 2014, global gas supply is expected to grow by 1.9% per annum or 172 Bcf/d over the outlook period through 2035, reaching a total of 497 Bcf/d by 2035.

Marcellus-Utica Shale

Shale Gas Growth Worldwide, Source: BP-­Energy Outlook report January 2014.

  • Shale gas is the fastest growing source of supply at 6.5% per annum, providing nearly half of the growth in global gas.
  • Shale gas supply is dominated by North America, which is expected to account for 99% of shale gas supply until 2016 and for 70% by 2035.
  • However, shale gas production growth outside North America is expected to accelerate and overtake North American growth by 2027.
  • China is the most promising country for shale production growth outside North America, accounting for 13% of world shale gas growth.
  • Together, China and North America will account for 81% of shale gas by 2035.

The International Energy Agency estimates of ultimately recoverable oil resources continue to increase as technologies unlock more shale resources. The IEA concludes that the Marcellus will play a major role in meeting U.S. demand growth over the next decade.

Other Economic Impacts of Low Cost Natural Gas

Low cost, high availability natural gas has already begun to change the landscape for electricity production by gas. Further, there are other impacts regionally as the Marcellus and Utica shale basin lies within the heart of the plastics processing industry in the Northeast U.S.

  1. Shale gas methane altered by cracking provides vast quantities of plastic feed stocks at lower prices. This results in manufacturers switching product with partial or full substitution using this feedstock.
  2. As shale gas prices drive down costs, composite plastics products achieve price parity with pressure treated wood, thus altering a significant product within the construction industry.
  3. Further, these low prices will initiate complete or partial substitution by plastics for products now made from wood, metal, glass, leather, and cotton fabric. (Gellrich, 2014)
Looking Forward

The Marcellus and underlying Utica shale formations have become a significant world-­‐class source of natural gas and light oils within the short span of six years since 2008. Constant, ongoing process improvement by industry players results in ever increasing estimates of yields on a year‐by‐year basis for this dynamic resource environment.

These two overlapping shale formations currently yield 12 billion cubic feet of natural gas per day from a combined total estimated formation source volume of 1.5 quadrillion cubic feet.

Density and Distribution of Unconventional Drilling Permits Throughout Pennsylvania. Source-­‐ PA DEP Oil and Gas Mapping-­‐ Unconventional Gas Wells Only.

Density and Distribution of Unconventional Drilling Permits Throughout Pennsylvania.
Source – ­PA DEP Oil and Gas Mapping – Unconventional Gas Wells Only.

Because of this increasing yield from the Marcellus-­Utica shale plays, the Northeast region of the United States is soon to be a net energy exporter, with sufficient quantities of low cost, excess natural gas to change the market in these significant ways: midstream pipeline flow changes altering industry configurations, foster not-­in‐kind product substitutions and impact overall energy economics, worldwide.

Even some of the most optimistic earlier predictions from experts and geologists did not anticipate these levels to be achieved prior to the year 2015 (Wall Street Journal, October 22, 2013).

The Marcellus-Utica shale formations are an amazing gift of nature that is, with new drilling knowledge and expertise, transforming our energy economy. Technology and innovative know-­how is unlocking these rich, vast quantities of life-­sustaining, American‐independent energy.

Jim Scherrer provides analytical services to energy, power and information technology industries.; 484-­875-­1700

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