Shale Gas Impacts NATURAL GAS

Transcription

1 Shale Energy in the Appalachian Basin Dan Brockett Penn State Extension, MCORE, and ShaleTEC Shale Gas Impacts NATURAL GAS

2

3 Lawrence County Data 166 wells permitted, located on 35 well sites 70 wells drilled or being developed Hilcorp: 50 RE Gas (Rex): wells reporting production (July) - 30 wells not reporting production

4 Mercer County Data 100 wells permitted, located on 25 well sites 61 wells drilled or being developed Hilcorp: 49 Chevron: 6 Halcon: 4 Other: 2-18 wells reporting production (July) - 43 wells not reporting production

5 45-65 Bcf

6 0-50 Bcf

7 0-60 Bcf This estimate is probably just for Burket Shale This area may have thick Rhinestreet

8 ft.

9 Shale Energy is a somewhat unique U.S. phenomena because of 3 factors; 1) Aggressive Entrepreneurs 2) Capital Markets (willing to fund & share risk) 3) Private ownership of resources underground - Most landowners are favorable toward shale gas production - This gives E&Ps a social license to operate on land near homes and farms - Without license, populations have ways to express their views (NY, MD, France)

10 Drilling Trends Shorter time to drill a well Months to weeks to days(currently) -30 to 50% increase in efficiencies Costs decreasing Water transport Gas recovery and remediation rates started at 1-2% Move to walking (2002), rigs built then for jumped purpose to 5-6% (2008), now at 10-15%? Longer wellbores More frac stages and move to target best rock(40% yields 80%) More proppant almost doubled from recent past Every frac is a unique effort matching pressures to rock Upgrades to subsurface technical expertise/technology Increased volumes per lateral Increased IPs/EURs/ROR flatter declines

11 Business Opportunities in a Low Price Environment? Efficiency anything that is made or assembled farther away that could be done closer to operations Made cheaper or works better/lasts longer Regulatory Is there a better way? Faster, cheaper, better for environment, easier to track, etc.

12 Efficiencies

13 Proposed Cracker Plant Sites

14 What s Occurring Now? Cracker plants are proposed, but not committed in the Appalachian Basin - Odebrecht said a final decision on building the proposed cracker plant will be made by the end of 2015 (Parkersburg, WV) - estimated cost $4 billion - Shell has yet to make final decision to build ethane cracker but have purchased the facility and paid for upgrades (Monaca, PA) - estimated cost $3 billion Cracker plants cost billions of dollars to build. They typically employ thousands during construction and hundreds during operations. There s also hope that the plants will attract manufacturers who use the products - Appalachian Resins Inc. has leased 50 acres of land in Salem Township to build a 600 million pound per year plant. Projected to start in early 2019? (Monroe County, OH) est. cost $1 billion - PTT-Marubeni Joint Venture Chose Belmont County, OH for a potential site. A partnership between Thailand s largest chemical company and a Japanese trading and investment house. $5.7 billion

15 NGL Volumes Grow; Cracker, Pipelines

16 The five NGLs ethane, propane, normal butane, isobutane and natural gasoline (pentanes+) Each successive NGL has an additional carbon molecule and different chemical properties. C 1 H 4 Methane C 2 H 6 Ethane C 3 H 8 Propane C 4 H 10 Butane (and Isobutane) C 5 H 12 Pentane (natural gasoline)

17 NGLs Have Added Value (based on BTU) Gas: Net Btu Value: Methane 1,011 Ethane 1,783 Propane 2,572 Butane 3,225 Pentane 3,981 Hexane 4,667

18 Who Consumes What? Source: Envantage

19 Infrastructure: Ethane Markets Transportation Costs: Marcus Hook -? Sarnia cents/gal. Gulf Coast cents/gal. Local 2 cents/gal.

20 Ethane Naptha Spread That collapse of oil price means much lower margins for those that crack natural gas

21

22

23 Crude Prices Ergon Oil Purchasing Appalachian Basin Effective Date Marcellus - Utica Medium API Gravity $ $48.43 Marcellus - Utica Light API Gravity $ $42.43 Marcellus - Utica Condensate 60.0 API Gravity and above $ $29.43

24 Where does your wet gas go? Hickory Bend cryogenic processing plants at New Middletown in Mahoning County separates wet-dry Liquids go to a fractionation plant in Harrison County, OH

25 Natural Gas Liquid Fractionation Pressure and temperature the boiling point will be reached by only one product in each tower This condensate will likely be different from condensate at the well.

26 Fractionation Plant

27 Conclusions Pipeline and utilization need to develop before Northwest PA develops large scale shale energy Still business opportunities in a low-price environment in efficiencies and meeting regulations A lot of ethane is still rejected into the gas stream Infrastructure needs to be developed to get the best and highest use out of NGLs Cracker plants could have a long term economic impact on the region

28 Thank You Questions Contact: Dan Brockett Photo Courtesy Penn State Marcellus Center