U.S. EIA Slashes Marcellus Shale Estimates

August 31st, 2011
in econ_news

marcellus-shale Econintersect:  The U.S. Energy Information Agency will cut its estimates of energy contained in the Appalachian Basin Marcellus shale by 80%.  The astounding aspect of this news is that it comes as the USGS (U.S. Geological  Service) increased its estimates.  According to Scientific Computing, the USGS has just increased the estimated recoverable natural gas by 40 fold and the recoverable natural gas liquids by 340 times from their last report in 2002.  Obviously there must still be considerable uncertainty about this resource.

Follow up:

From a Bloomberg article:

The U.S. will slash its estimate of undiscovered Marcellus Shale natural gas by as much as 80 percent after a updated assessment by government geologists.

The formation, which stretches from New York to Tennessee, contains about 84 trillion cubic feet of gas, the U.S. Geological Survey said today in its first update in nine years. That supersedes an Energy Department projection of 410 trillion cubic feet, said Philip Budzik, an operations research analyst with the Energy Information Administration.

“We consider the USGS to be the experts in this matter,”Budzik said in an interview. “They’re geologists, we’re not. We’re going to be taking this number and using it in our model.”

The revised estimates, posted on the agency’s website, are likely to spur a debate over industry projections of the potential value of shale gas.

Here is a quote from the USGS Press release that prompted the U.S. EIA to reduce there estimates:

The Marcellus Shale contains about 84 trillion cubic feet of undiscovered, technically recoverable natural gas and 3.4 billion barrels of undiscovered, technically recoverable natural gas liquids according to a new assessment by the U. S. Geological Survey (USGS).

These gas estimates are significantly more than the last USGS assessment of the Marcellus Shale in the Appalachian Basin in 2002, which estimated a mean of about 2 trillion cubic feet of gas (TCF) and 0.01 billion barrels of natural gas liquids.

The increase in undiscovered, technically recoverable resource is due to new geologic information and engineering data, as technological developments in producing unconventional resources have been significant in the last decade. This Marcellus Shale estimate is of unconventional (or continuous-type) gas resources.

Since the 1930's, almost every well drilled through the Marcellus found noticeable quantities of natural gas. However, in late 2004, the Marcellus was recognized as a potential reservoir rock, instead of just a regional source rock, meaning that the gas could be produced from it instead of just being a source for the gas. Technological improvements resulted in commercially viable gas production and the rapid development of a major, new continuous natural gas and natural gas liquids play in the Appalachian Basin, the oldest producing petroleum province in the United States.

According to Geology.com there is a much larger shale reservoir a greater depths, covering a larger area and centered directly beneath the Marcellus shale, called the Utica shale.  Potentially this may contain far more energy than the thinner Marcellus layer above it.

utica-shale-map

Sources:  Bloomberg, Geology.com, USGS Press Release and Scientific Computing









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