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Marcellus will be the nation's No. 1 producer

The gas field is about to overtake a similarly rich formation in Arkansas and Texas.

By Kevin Begos in Associated Press 8/6/2012

PITTSBURGH - The Marcellus Shale is about to become the most productive natural gas field in the United States, according to new data from energy industry analysts and the federal government.

Though serious drilling began only five years ago, the sheer volume of Marcellus production suggests that in some ways there's no going back, even as New York debates whether to allow drilling in its portion of the shale, which also lies under large parts of Pennsylvania, West Virginia, and Ohio.

The top spot for the Marcellus "doesn't surprise me," said Jay Apt, a professor of technology at Carnegie Mellon University. "But will it lead to industries that spring up to use that gas?" he asked, adding that much of the bounty could end up being shipped to Canada, the Gulf Coast, or overseas.

In 2008, Marcellus production barely registered on national energy reports. In July, the combined output from Pennsylvania and West Virginia wells was about 7.4 billion cubic feet per day, according to Kyle Martinez, an analyst at Bentek Energy. That's more than double the 3.6 billion cubic feet from April, and represents more than 25 percent of national shale gas production.

That's neck and neck with production from the Haynesville region in Arkansas and Texas, but new drilling permits there have declined sharply.

The Powell Shale Digest, an industry newsletter based in Fort Worth, Texas, concluded that a recent report from the U.S. Energy Information Agency means "it is reasonable to assume" the Marcellus has or will soon pass Haynesville as the top producer.

The Marcellus Shale is a gas-rich formation of rock thousands of feet below ground. Advances in drilling technology made the shale accessible, which led to a boom in production, jobs, and profits, and a drop in natural gas prices for consumers. But there are also concerns about pollution and impacts to roads and other public services.

Apt said having a natural resource bounty was one thing, and using it wisely was another. The current wholesale price of natural gas is about $3 here, but $12 or more in Europe and Japan.

"It's clear people will want to export" the Marcellus gas, Apt said, adding that such an outcome could lead to what economists call "the resource curse," which is when the general population hardly benefits while a few get very rich.

But Apt said there were some hopeful signs, such as Shell Oil Co.'s plan to build a petrochemical plant to turn Marcellus gas into other consumer and industrial products, including plastics. It's widely believed that if Shell moves ahead with plans to build that $2 billion plant north of Pittsburgh, other small industries will follow.

For now, it looks like the Marcellus region will be in the top production spot for several years, analysts say. Though drilling has slowed, there were still 288 new well permits issued in May, and more than 1,200 for the first five months of the year, according to data from LCI Energy Insight, an El Paso firm that tracks national energy trends.

Martinez noted that several major Marcellus region pipeline expansions were scheduled for completion in the fall, which should allow production to grow even more and make it easier to ship gas to other parts of the Northeast.

That could boost wholesale prices, he said, and keep energy companies focused on the region.

"Long-term, being able to move the gas out of the region will give some support to those prices," Martinez said.

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