More, And More, And More Gas From The Marcellus Shale

Much European comment from the “experts”, also known as those who never saw shale coming, holds to a view that Europe shale gas is up to ten years away.

Shale isn’t coming to Europe anytime soon, although the indirect impact of US production in places like the Marcellus shale in Pennsylvania means that we get the benefit of the prices even today. So the question of whether we will see shale in Europe, next year, 2015 or 2020 is not pressing. But for those who think the European experience is going to be so slow, let’s look at the Marcellus experience.

The history of the Marcellus shale is interesting. Five years ago, back when many expert European studies yet to even be published today were just starting out, the Marcellus wasn’t even on the radar. But the ramp up in both reserves and actual production is startling. Next time you hear about shale gas being “hype”, consider the reality of the Marcellus, where hype understated the facts on the ground, or is that flowing out of the ground?

Natural gas production from the Marcellus Shale in Pennsylvania is expected to more than double in 2011 to 2.5 Bcf/d from 1 Bcf/d in 2010, the Pennsylvania State University’s College of Earth and Mineral Sciences said in a study Tuesday. By 2015, the Pennsylvania Marcellus could be producing more than 7 Bcf/d,substantially exceeding all gas output from offshore federal waters, the report noted. Marcellus natural gas production could nearly double again by 2020, with more than 13.5 Bcf/d, “which would make Pennsylvania second only to Texas in natural gas production.”

A major takeaway here from something thrown away in the above, so I’ll repeat it.

By 2015, the Pennsylvania Marcellus could be producing more than 7 Bcf/d, substantially exceeding all gas output from offshore federal waters.

This should really make US (and European) energy traders sick. Traders will no longer be able to rely on scenarios like this old favourite although it was published only yesterday:

It’s a very difficult period of time to be short natural gas with hurricane season right ahead of us,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida.

Sorry, that one doesn’t really matter anymore, which I pointed out one year and one day ago channeling Peter Tertzakian yet again:

In the past, waiting for the first hurricanes in the Gulf of Mexico has been a highly anticipated time for onshore natural gas producers, like waiting for the park warden to open the campgrounds in spring. The mere threat of a hurricane barreling over Cuba and into the Gulf toward the Texas or Louisiana coast – trashing production platforms and creating enough of a surge to uproot shallow pipelines and disrupt supply lines to the continent – was enough to elevate natural gas prices, allow producers to boost their Q3 cash flows and use the opportunity to lock in higher priced forward contracts.

Everyone in the business is now well aware of the shale gas boom, which is an ongoing mega trend that is redefining the sources and costs of supplying natural gas in North America. One less-realized consequence of this shakeup is that hurricane season in the gas markets has effectively been neutered. There isn’t a lot of production coming from the Gulf of Mexico anymore, so there isn’t much left to be trashed by the occasional Category 4 storm. In effect, hurricane season in natural gas markets has been obsolesced with a human activity that’s been around ever since the time of Stonehenge – innovation.

Evidently, the news didn’t travel from Calgary to Florida in the past year. But the traders’ job is to talk up their book. Mine, unlike the energy experts who never saw shale coming, and now are in denial stage, is to question conventional wisdom, not blindly accept it.

Back to Pennsylvania. Is there any hope for the pathological pessimists? In a world of good news that that keeps on getting better, they clutch at this straw.

The future is not without some challenges, the report noted.

The habitually cautious breathe a sigh of relief. Not for long.

“Currently,there are at least five other major shale gas plays competing with the Marcellus, including the Barnett, Haynesville, Fayetteville, Woodford and Eagle Ford formations as well as several shale formations in Canada. As production from these plays expands, prices for natural gas are likely to remain relatively low and pressures for cost containment will be intense.”

SOURCE:
No Hot Air: “More, and more, and more gas from the Marcellus shale”

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Posted by admin on May 26th, 2010. Filed under Barnett Shale, Eagle Ford Shale, Fayetteville, Haynesville Shale, Marcellus Shale, Shale Basins. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry