Industrywide Issues

  • Will the U.S. Become Addicted to Imported Natural Gas Like We Have Imported Oil?

    An interesting article recently ran in the Fort Worth Weekly (Texas), discussing the looming competition that is about to arrive from imported liquefied natural gas (LNG). The context of the article is mostly about how an increase in imports will affect energy companies and workers in the Barnett Shale play in Texas. However, the coming competition will affect all natural gas plays in the U.S., including the Marcellus.

    The United States has imported natural gas for decades — it’s already the fourth largest importer of natural gas in the world, buying mostly from Canada and Mexico. This country has also been importing LNG for about 20 years, primarily from Algeria and the Caribbean nation of Trinidad and Tobago.

    In the last few years, however, several factors have combined to make LNG importing much easier. The three new LNG terminals and 15 more in the planning or construction stages — on the East, West, and Gulf coasts — will triple the United States’ capacity for handling such imports. The prices of building LNG carrier ships has dropped sharply in the last decade, and the newest ships use much less fuel to get across the ocean than the older generation of such tankers, leading to a tripling of the worldwide LNG fleet. For those reasons and others, bigger players have entered the game: Egypt, Nigeria, and Qatar — home to the world’s largest natural gas field — have also begun selling to the United States. And they are delivering LNG at rates competitive with what it costs to produce the gas domestically.

    The author of the article concludes this situation is good for consumers (lower prices), but potentially bad for those in the industry. But is continued dependency on foreign sources for our domestic energy needs really good for consumers–indeed all Americans? The beauty of horizontal drilling and plays like the Marcellus are to get us away from our energy dependence on potentially hostile foreign countries. In this author’s opinion, it would be a tragedy to repeat the same mistakes with natural gas that we have with oil.

    Read the full article: Cool Competition: A new wave of imports could undercut Barnett Shale drillers

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    $25K Per Acre for Lease Deals? Not in the Marcellus — Yet

    An interesting tidbit from a story about energy giant ConocoPhillips. The article, published on the Houston Chronicle’s website, was about recent efforts by ConocoPhillips to “debunk Wall Street’s view that the Houston-based oil major grows by acquisition rather than finding its own oil and gas.” Buried far down the story is a statement (not a direct quote but a summary statement) from Larry Archibald, company vice president of exploration and production. The statement, as summarized by the reporter, was this:

    He [Archibald] said ConocoPhillips shied away from “feeding frenzies” at high-profile shale plays where some companies rushed in and spent $25,000 or more per acre amid the pre-recession boom in gas production. Those plays included the Haynesville in East Texas and northern Louisiana, and the Marcellus in Pennsylvania, New York, Ohio and West Virginia.

    He said ConocoPhillips will keep spending in more established plays, such as the Barnett shale near Fort Worth, and the lesser-known Eagle Ford in South Texas, where the company has a leading acreage position.

    Everyone drools to see energy companies spending $25K per acre for leasing rights. But don’t get your hopes up too high. Marcellus Drilling News has not (so far) found any instances of leasing deals that approach anything near $25K per arce. It’s been more like $5K per acre on the high side in the Southern Tier of New York. If you know of high paying deals in the Marcellus, please let us know!

    The other interesting point about the statement is this: It looks like ConocoPhillips will not be a major player in the Marcellus anytime soon, which is unfortunate.

    Read the full article: ConocoPhillips flaunts its exploration finds

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    West Virginia Professor Touts Benefits of Shale Gas

    A positive opinion article by Donald W. Lyons, professor of engineering at West Virginia University, recently ran in the Huntington, W.Va. Herald-Dispatch. Among the points he makes are these:

    The United States needs to greatly reduce the amount of imported oil. To achieve this, we need more energy conservation, more wind, solar and nuclear energy and more bio-fuels. But even as we work to increase all of these, we also need more domestically produced natural gas. The failure to diversify our energy policy will lead to further consumer pain and a continued dismantling of key portions of our economy.

    The economy of West Virginia can benefit by the production of Marcellus shale natural gas. West Virginia is fortunate that the state will continue to be a major contributor to the “fuels of the future” and the good jobs associated with energy production.

    Read the full article: Shale gas could move U.S. toward energy independence

  • Mainstream Media Finally Prints Balanced Article on Drilling in the Marcellus

    Don’t look now, but the Binghamton Press & Sun-Bulletin has actually printed a fair and balanced look at the issue of drilling in the Marcellus Shale deposit! The ‘guest viewpoint’ is written by Robert W. Watson, Ph.D., emeritus associate professor of petroleum and natural gas engineering and environment systems engineering at Pennsylvania State University. Whew! A mouthful.

    Dr. Watson’s article is an excellent and recommended read for landowners and for all sides of the drilling debate. Here are a few excerpts to encourage you to read the whole thing:

    Drilling a Marcellus well is a significant undertaking, but it is not a new undertaking. Some of the drilling technologies used in developing these wells have their roots in Pithole City, Pa. (circa 1865) and Gulf Oil Company’s laboratory research during the 1950s.

    Hydraulic fracturing, a technique to stimulate a well’s productivity, was first observed by South Penn Oil Company at its operations near Clarendon, Pa., during World War II, and was perfected and patented by Standard of Indiana during the late 1940s.

    And on the matter of groundwater contamination by hydraulic fracturing:

    [H]ydraulic fracturing has been misrepresented – even demonized – with many of the concerns having no basis in fact.

    Hydraulic fracturing, in its simplest form, it is the use of a water and sand mixture to create a highly conductive zone where natural gas can more readily flow from the natural gas bearing formation to the wellbore. The additives used are in very small quantities and equally low concentrations. This mixture is introduced to the subject formation via steel pipe grouted in place with cement. The subject formation is nearly a mile below the surface and is separated from the surface by an equal distance of rock. The simple reality is that stimulation using this technique does not impact ground-water bearing zones.

    Head on over to the Press & Sun-Bulletin site and read the article for free before it disappears into the paid archives section.

    Read the full article: Going for the gas – Make room for science and technology in Marcellus debate