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New Reasons to Celebrate US Shales

Oil and Gas Journal
September 17, 2010

Just when I thought I’d heard everything about hydraulic fracturing’s potential to increase US natural gas production, University of Wyoming energy economics professor Timothy J. Considine suggested some other developments and possibilities at a Sept. 13 Capitol Hill briefing sponsored by the Natural Gas Supply Association.

The event occurred as the US Environmental Protection Agency held the first of two public forums in Binghamton, NY, on whether development of the Marcellus shale formation potentially threatens drinking water supplies. New York’s legislature has suspended Marcellus development for a year, while Pennsylvania and West Virginia are moving ahead.

“This resource is going to be around for a long time because it’s going to take a long time to develop – not just a few years, but 10 or 20. It could employ more Pennsylvanians than the steel industry,” said Considine, who was at Pennsylvania State University until his recent move to Wyoming.

Because Marcellus gas is dry and requires little treatment, some producers are also building processing plants which could serve petrochemical customers, he indicated. MarkWest Liberty Midstream & Resources announced on Apr. 15 that it reached agreements with several southwestern Pennsylvania and West Virginia Marcellus producers and would expand its processing and fractionation capacity to 625 million cubic feet/day by the end of 2011. Considine said that the midstream partnership will sell the butane and natural gas liquids to a West Virginia petchem plant.

He also tried to temper shale gas’s bright prospects with some realism. Much of the Marcellus in Pennsylvania is in a sparsely populated part of the state, and “there’s going to be some environmental disruption as trees are cut and roads and pipelines are built.” Other problems have occurred, such as when one producer tried to save money by buying imported Chinese pipe which turned out to be substandard and contaminated drinking water supplies – a clear-cut piping problem which Marcellus development opponents have tried to link to hydraulic fracturing.

“There are risks. It’s the responsibility of the industry and government to communicate what the risks are, along with the benefits,” Considine maintained.

But he also said that the 20 known US shale resources plays include a few which are more oily than gaseous, such as the Eagle Ford in South Texas and the Niobara in the Denver-Julesberg Basin as well as North Dakota’s Bakken shale, which is already producing. Considine told me following his presentation that EOG Resources Inc. has extensive Niobara holdings, and a test of its Jake well there flowed 1,558 bbl/day. In a Sept. 16 presentation to a Barclays Capital investors conference, EOG chief executive Mark G. Papa said described the Niobara as a highly fractured play requiring additional production history to evaluate its rock matrix contribution. The Houston independent producer’s four-rig drilling program is concentrating on 100,000 of its 400,000 net acres there, he said.

Considine added that enthusiasm about the Niobara’s prospects helped Wyoming attract nearly $13.3 million in successful bids at its Aug. 4 lease sale because the underlying formation could extend north all the way to the Powder River Basin.