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Broadening the Marcellus Discussion – Issues and Economics of the Resource

Broadening the Marcellus Discussion – Issues and Economics of the Resource. Thomas Murphy Penn State Cooperative Extension October 2009. How big is the Marcellus Shale?. …now estimated that potential recoverable gas could be 489 trillion cu. ft. w/current technology.

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Broadening the Marcellus Discussion – Issues and Economics of the Resource

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  1. Broadening the Marcellus Discussion – Issues and Economics of the Resource Thomas Murphy Penn State Cooperative Extension October 2009

  2. How big is the Marcellus Shale? • …now estimated that potential recoverable gas could be 489 trillion cu. ft. w/current technology. • U.S. consumption annually is 20 trillion cu. ft.

  3. Natural Gas Facts • Geologists estimate a 100+ year supply of natural gas (current use rates) • Marcellus is largest shale play in U.S. • 2nd largest in the world • 50 to 93,000 sq. miles • Lifespan to drill and extract is likely decades • Companies reporting increasingly strong yields on Marcellus wells -2 to 10 Mmcfd IP • Transportation costs add up to 50% onto cost of gas at delivery (current price) • Proximity to market is key for Marcellus • 500-900 Marcellus wells planned for ’09 • Over 1200 permits issued • Rig count rising in PA

  4. Why here? Why now?Updated technology--drilling/fracing/waterAdditional shale targetsFavorable economics

  5. Current Permits & Drilling

  6. Leasing/SeismicFrenzy • 18 companies leasing • One “new” company conducting seismic • New agreements • New process in area

  7. Issues Associated with Marcellus • Leasing to landowners unfamiliar with process • tens of thousands • Legal uncertainties w/lease documents • Few O&G attorneys • Financial decisions lasting generation(s) • Limited understanding of economics of the process

  8. Impacts on Communities --New “haves” and “have nots” --Local officials • new decisions • new skill sets --Change in ag? -green space --Broad change coming…

  9. Environmental Issues • Groundwater • Surface waters • Headwater streams • NORM • Gas migration • Sound • Wildlife • Forest fragmentation • Aesthetics –viewsheds Research needed???

  10. Build Out of Infrastructure Key components: • Pipeline • Compressors • Gas Processing Plants • Water Treatment/Injection (availability) • Oil Field Service Companies • Regulatory Agencies –monitoring the process • Work force needs

  11. Pipelines • Critical to development of well • $1 Billion+ in projects planned • Change in how we use ag lands? • Placement of lines • No eminent domain

  12. Marcellus Economics • 35+ energy companies looking at Marcellus and increasing • $5 Billion+ collectively -$55B by 2014 • $200 million recently by Hess Oil in NE PA • $165 million deal by Fortuna in NE PA • Some selling other assets to reposition here • Investments by Wall St. as JV partners • KKR • Avista Capital • StatoilHydro • Enerplus Resources

  13. Gas Field Services • Most needed drilling services scaled for Marcellus were not in Appalachian basin • New regional centers in WV/PA/Southern Tier NY • Critical link in development • New workforce needs • New short line rail demand, commercial real estate interest, airport traffic, engineering offices, road re-construction, housing development

  14. Workforce Development

  15. Industry Workforce Needs Assessment • 75% of workforce will need OTJ training • Some technical training required • Certificate • 2 year programs • Community colleges • Vocational/Technical • 25% need a professional university degree • New program offerings to train PA-bred workforce • Industry sanctioned/sponsored

  16. What does this mean in terms of jobs?

  17. What specific jobs are required? Natural Gas Workforce Requirements By Category

  18. www.naturalgas.psu.edu www.pct.edu/msetc

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