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Rising Marcellus Shale Production Might Not Benefit Natural Gas

Despite a declining number of wells, Marcellus Shale gas production in 2013 is up 50% from 2012. According to Nick Nanos, President and CEO of Nanos Research, this can be attributed at least in part to a shift of focus.

“The focus has been on higher quality drills and wells that can yield a greater value,” Nanos explains.

While it seems like a higher production rate is good for consumers in the short term, in reality these statistics could lead to a slowing-down of the resource’s development. According to Nanos, the higher supply provided by the increased gas production will keep natural gas at a lower price. The diminished price might lead to a decreased incentive to develop the resource due to the high supply and low demand. This, combined with a competing market coming from Mexico’s natural gas supply, could lead to decreased drilling.

“Americans first are consumers,” says Nanos. “If it can’t be delivered to markets because the price is too low, we might have more of an evolution than a revolution.”

In addition to this, Nanos warns that there is still a possible range of how much natural gas is actually under the surface. He says this is positive news towards validating a possible higher amount of gas, but it's still too early to make a conclusive statement about the exact number.

“I think they should be hopeful and optimistic, but not confident,” cautions Nanos.

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