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Wednesday, September 3, 2014

Marcellus analysis: immense profit - and environmental impact

Global energy, mining, and minerals analyst and consulting firm Wood Mackenzie has looked at the next two decades of Marcellus natural gas development and  found profit - and peril.

WM projects $90 billion of potential net revenue – the value of marketed gas less development costs.

Although rig counts have fallen across the Marcellus since early 2012, we can see that improved efficiency and a renewed focus on the play's core sub-plays have led to on-going growth.
Well results are improving, with estimated ultimate recovery (EURs) in the top areas increasing by approximately 10% since 2013, thanks to the use of longer laterals and high-volume completions.
As such, we have raised our forecast of 2020 output from 14 bcfed to 20 bcfed [a 43% increase] and estimate that the Marcellus will soon account for nearly 25% of total US shale gas supply.
Drilling and completion costs typically range from US$6 million to US$9 million across the sub-plays…
WM also predicts that the top 20 operators will drill 25,000 wells through 2035 - at radically higher rates of resource consumption. According to this article by Natural Gas Intelligence, WM ominously finds that:
Water usage had increased substantially in [southwestern Pennsylvania]. Operators there used a median average of about 4 million gallons per well in 2009 (with a range of 2-6 million gals/well), but by 2013 the median had increased to about 10 million gals/well (7-13 million gals/well). In [northeastern Pennsylvania], median water usage increased from less than 5 million gals/well in 2009 to about 7 million gals/well in 2013.
The expanded use of proppant was also noteworthy in both areas. In [southwestern Pennsylvania], the median use of proppant increased from about 1 million pounds of sand per well in 2009 to about 12 million pounds in 2013. [Northeastern Pennsylvania] usage of proppant increased from about 5 million pounds of sand per well in 2009 to about 13 million pounds in 2013.
The increases in water and proppant use are dramatic.  The implications of those 2 statistics - beyond drastically increased water stress - are dramatic increases in chemicals used, similar increases in truck trips, air pollutionroad damage, and accidents. And vastly more wastewater, injection disposal, NORM and TENORM, and hazardous waste.

In short - sharply greater risks and cumulative impacts.

And all of that, and the activity from those projected 25,000 wells, is before refracking is factored in.

Even with increasing efficiency, can this $90 billion of Marcellus net value be extracted under business-as-usual conditions that require dramatically increased resource consumption, risks, and impacts? Or is that $90 billion of net value the key to unlocking the business case for more sustainable shale gas extraction?  

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