broadening the marcellus discussion – issues and economics of the resource thomas murphy penn...
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Broadening the Marcellus Discussion – Issues and Economics of the Resource
Thomas MurphyPenn State Cooperative ExtensionOctober 2009
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How big is the Marcellus Shale?• …now estimated that
potential recoverable gas could be 489 trillion cu. ft. w/current technology.
• U.S. consumption annually is 20 trillion cu. ft.
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Shortcut to shale_gas.JPG.lnk
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Natural Gas Facts• Geologists estimate a
100+ year supply of natural gas (current use rates)
• Marcellus is largest shale play in U.S.– 2nd largest in the world– 50 to 93,000 sq. miles– Lifespan to drill and
extract is likely decades
• Companies reporting increasingly strong yields on Marcellus wells -2 to 10 Mmcfd IP
• Transportation costs add up to 50% onto cost of gas at delivery (current price)
• Proximity to market is key for Marcellus
• 500-900 Marcellus wells planned for ’09
• Over 1200 permits issued• Rig count rising in PA
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Why here? Why now?Updated technology --drilling/fracing/water
Additional shale targetsFavorable economics
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Current Permits & Drilling
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Leasing/Seismic Frenzy
• 18 companies leasing
• One “new” company conducting seismic
• New agreements• New process in area
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Issues Associated with Marcellus• Leasing to landowners
unfamiliar with process– tens of thousands
• Legal uncertainties w/lease documents– Few O&G attorneys
• Financial decisions lasting generation(s)
• Limited understanding of economics of the process
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Impacts on Communities--New “haves” and “have
nots”--Local officials
– new decisions– new skill sets
--Change in ag?-green space
--Broad change coming…
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Environmental Issues• Groundwater• Surface waters• Headwater streams• NORM• Gas migration• Sound• Wildlife• Forest fragmentation• Aesthetics –viewsheds
Research needed???
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Build Out of Infrastructure
Key components:– Pipeline– Compressors– Gas Processing Plants– Water Treatment/Injection (availability)– Oil Field Service Companies– Regulatory Agencies –monitoring the process– Work force needs
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Pipelines• Critical to development
of well– $1 Billion+ in projects
planned
• Change in how we use ag lands?
• Placement of lines• No eminent domain
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Marcellus Economics• 35+ energy companies looking at Marcellus
and increasing– $5 Billion+ collectively -$55B by 2014
• $200 million recently by Hess Oil in NE PA• $165 million deal by Fortuna in NE PA
– Some selling other assets to reposition here– Investments by Wall St. as JV partners
• KKR• Avista Capital• StatoilHydro• Enerplus Resources
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Gas Field Services• Most needed drilling services scaled for
Marcellus were not in Appalachian basin– New regional centers in WV/PA/Southern Tier NY
• Critical link in development• New workforce needs• New short line rail demand, commercial real
estate interest, airport traffic, engineering offices, road re-construction, housing development
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Workforce Development
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Industry Workforce Needs Assessment
• 75% of workforce will need OTJ training – Some technical training required
• Certificate• 2 year programs• Community colleges• Vocational/Technical
• 25% need a professional university degree• New program offerings to train PA-bred
workforce– Industry sanctioned/sponsored
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What does this mean in terms of jobs?
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Num
ber
of W
orke
rs
2009 2010 2011 2012 2013
Year
"Likely" Scenario Northern Tier WIB Region Marcellus Shale Workforce Requirements By Phase
Pre-Drilling (Short-term)
Drilling (Short-term)
Production (Long-term)
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What specific jobs are required?
General Of-fice20%
CDL10%
General Labor20%
Heavy Equipment
17%
Geologists3%
Lawyers4%
Paralegal1%
Cartog/GIS1%
Timber Logging
1%
Welders1%
Welders-Helpers
1%
X-Ray0%
X-Ray Tech0%
Engineers3%
Inspectors1%
Supervisors 5%
LandmenRealty
5%
Semi-Skilled Tech.6%
Natural Gas Workforce Requirements By Category
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www.naturalgas.psu.edu
www.pct.edu/msetc