The federal government gave the Marcellus shale a big thumbs down this week. It dramatically downgraded its estimate of technically recoverable natural gas in the formation, from 410 trillion cubic feet (Tcf) (enough to heat and power the U.S. for 20 years) to 141 Tcf (about a 7 year national supply).
These are still huge numbers — a decade ago, the U.S. Geological Survey (USGS) estimated the Marcellus contained just 2 Tcf. And shale gas will make up an ever-increasing amount of our natural gas supply in the years to come. The agency projected shale gas production would more than double in the next 25 years, from about a quarter of all natural gas to just under half of the total amount used in the U.S.
The revised estimate greatly reduces the importance of the Marcellus in terms of national shale gas reserves, from 55 percent of all U.S. shale gas to around 30 percent. It would still be the biggest shale gas deposit in the country, however.
U.S. natural gas production from 1990-2035, as estimated in the U.S. Energy Information Administration's report.
So, what happened to all that gas? Did it simply disappear?
Not exactly. For starters, the Energy Information Administration got a whole year's more worth of data from producing wells. In Pennsylvania alone, there are 4,500 completed Marcellus wells, and all the gas these wells produce eventually gets reported to government agencies.
This information eventually gets incorporated into a model that calculates the amount of gas in the rock.
The model includes variables which are pretty well understood, like the size and thickness of the 5-state shale formation. It also includes factors that are not well known: the porosity and permeability of the rock in different parts of the shale, for instance.
"And those will differ over different parts of the shale. You don't really know that until you start drilling," says Kenneth Medlock III of Rice University's James A Baker III Institute for Public Policy.
Terry Engelder, a geosciences professor at Penn State, and one of the first to predict a shale gas bounty in the Marcellus, believes the EIA may be low-balling its estimates from parts of the Marcellus that have yet to be extensively developed. In essence, he says, they're using a "worst-case" scenario (or maybe "not-so-great-case" scenario) and have come up with a more conservative estimate.
"What I think EIA did was take the proven part of the play into account but downgraded the other parts," Engelder says.
Another factor may be politics. Last summer, the USGS estimated there were about 84 Tcf — a far cry than the EIA's figure of 410.
Medlock says its likely federal energy officials wanted to have numbers that were more in-line with each others.
"They're trying to reconcile what they have with what USGS has done," says Medlock. "I still would argue what the best indicator of what's actually in the ground is the level of activity in region. Marcellus is certainly an area that is absolutely booming. Firms are trying to acquire acres and drill wells as fast as they can."
Does the estimate matter? In the long term, yes, these estimates help steer public policy, says Tim Carr, geology professor at West Virginia University.
The lower numbers might effect, say, the Department of Energy's decision-making of over-permitting liquefied natural gas (LNG) export facilities, or whether a utility will want to build a natural gas powered turbine to replace an aging coal-fired plant, Carr says.
In the short term, however, these estimates won't effect the level of drilling activity much. One thing that does make a difference is the decade-low price of natural gas. Supply has outstripped demand, and big companies like Consol, Chesapeake, and EQT have all announced they will scale back gas drilling. Instead, they will go where the money is, Carr says: oil. The Utica shale, in nearby Ohio, has much more oil than shale gas. With oil prices remaining high, that's where the drill rigs appear to be headed for the moment. It's classic supply-and-demand economics.
"When the price of beef goes up," says Carr, "everybody starts raising cows."
AEO2012 Early Release Overview
This paper provides an overview of the EIA's Annual Energy Outlook 2012 report, including a number of figures on natural gas supplies. [PDF]
Reid R. Frazier is Marcellus Shale reporter for the Allegheny Front. email: reid.frazier@verizon.net
Follow him on Twitter @reidfrazier
