Marcellus Remains Driver of US Shale Gas Revolution
The Marcellus shale play remains the driving force behind the North America shale gas revolution, with current production of 12 Bcf/d surpassing production from any shale gas play worldwide, said Jeanie Oudin, Wood Mackenzie Lower 48 analyst who focuses on the Northeast, Rockies and West Coast, at a media briefing Wednesday in Houston. Wood Mackenzie anticipates production to surpass 20 Bcfe/d in 2018, attributing the enormous growth to increasingly productive wells and operators achieving better than expected results through optimal completion methods.
The Utica shale play in eastern Ohio also is garnering a lot of attention and capital from the oil and gas industry. Current production from the play is only 1 Bcf/d, but Wood Mackenzie sees production rising above 5 Bcf/d in 2018 as operators apply lessons they’ve learned in the Marcellus to the Utica. These lessons include pairing with midstream partners to ensure that takeaway capacity and infrastructure are in place, said Oudin. Today, 5,000 wells are producing in the Marcellus.
This year, operators will spend $18 billion in CAPEX for Northeast shale production growth, including $12 billion for the Marcellus and $6 billion for the Utica. Production from the northeast and southwest portion of the Marcellus play is growing considerably, but CAPEX has actually fallen for the northeastern Marcellus as productive wells and improving EURs allow operators to do more with fewer rigs, Oudin noted.
Northeast and southwest Pennsylvania have emerged as two core areas of the Marcellus. In the northeast, Susquehanna and Bradford counties have emerged as core subplays, particularly in the Susquehanna core. Operators active here include Chesapeake Energy Corp. and Cabot Oil and Gas operate here; Cabot was responsible for 15 of the top 20 producing Marcellus wells in the second half of 2013. Wells with EURs of 8 to 12 Bcf are being seen in the Susquehanna core; Cabot has seen wells with even greater results, thanks to the 350-foot thick Marcellus formation.
In the northeast, operator success is all about location in the core. In the southwest, operators are taking a more creative approach to completing wells, experimenting with longer laterals or different size frac stages. EURs for southwest Marcellus wells are lower than northeastern Pennsylvania, but southwest Pennsylvania is liquids rich, so well economics might be stronger.
Operators also are investing in midstream development. Currently, an estimated 1 Bcf/d of gas is being choked due to lack of takeaway capacity and infrastructure; 50 to 60 percent of that choked production is in northeast Pennsylvania. Wood Mackenzie sees more production upside potential as the backlog of northeast wells are brought online and pipeline expansions start coming online in 2015, Oudin said.
Operators are shoring up positions in the two Marcellus core areas, focusing on the better portions of the play and positioning themselves in either one play or the other, Oudin said, adding that no mass exodus has occurred due to low gas prices.
The Utica play has become more a gas story than a liquids play, with operators, including Aubrey McClendon’s American Energy Partners, focusing on the wet gas window in Belmont and Monroe counties in southeastern Ohio. Oudin noted that 19 of the top 20 Utica wells in last year’s fourth quarter were drilled in Belmont County. Production from these wells is 90 percent gas, but rival wells in the Marcellus’ Susquehanna core in terms of test and IP rates. With 24 hour test rates of 40 million cubic feet per day, wells in Belmont County, Ohio equate to a 12 Bcf/d well in Susquehanna and offer significant potential.
Low U.S. gas prices has resulted in some players selling non-core Utica assets in northern and western Ohio, and more divestitures are anticipated, said Oudin. Drilling in the Utica oil window has died off in the past year or so. A few smaller operators are running rigs here, and Chesapeake and other operators are still testing here, but the rig count has fallen and a number of players are exiting their positions here.
Operators also are starting to explore the Upper Devonian play in the Northeast, primarily targeting the Rhinestreet, Burkett and Geneseo formations. The Upper Devonian offers similarities to the Marcellus, with strong potential for rich gas production, but full scale development will not take place till late 2015/early 2016 as operators focus on core Marcellus assets.
Companies such as Range Resources and Anadarko Petroleum Corp. are testing the play’s stacked pay potential in the southwest and northeast. The Upper Devonian’s middle formation is not as productive, meaning development will likely mimic the Marcellus’ northeast-southwest pattern.
Upper Devonian wells are expected to have smaller recovery rates of 3 Bcf per well, but operators could maximize Marcellus infrastructure and achieve cost savings of $300,000 to $850,000 a well through dual zone development from multi-well pads. Wells in the play are thinner and smaller well recoveries are expected 3 Bcf/ a well – but operators could maximize infrastructure build for Marcellus – and achieved 300 to 850,000 a well cost savings through dual zone or tri-zone development off multi-well pads.
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Senior Editor | Rigzone