Wednesday, July 29, 2009

Marcellus Shale Estimates Project Even Higher

I ran across this report today that the Marcellus Shale could end up yielding even more natural gas than expected, which already was a major number:

New calculations show the Appalachian Basin's Marcellus Shale formation could yield enough natural gas to supply all U.S. needs for nearly two decades -- dramatically more than previous estimates. Penn State University geosciences professor Terry Engelder projects nearly 500 trillion cubic feet of natural gas could be produced from the entire formation, which is found in portions of five states, including most of Pennsylvania. Engelder published his latest estimate in the August issue of Fort Worth Oil and Gas Basin magazine.

"If the natural gas from the Marcellus could be extracted on demand, the Marcellus alone would last the U.S.A. more than 19 years, producing 489 trillion cubic feet of gas," Engelder said Monday. It was Engelder and Gary Nash, a professor at State University of New York at Fredonia, who stirred interest in the natural gas industry early in 2008 when they projected that production in the Marcellus Shale formation could bring massive expansion of the industry. Late last year, Engelder made news with an estimate that 392 trillion cubic feet could be produced -- 13 times the amount the nation uses on an annual basis. Western Pennsylvania's average natural gas consumer uses about 98,000 cubic feet annually.

From the standpoint of a new energy plan that relies more on natural gas, this is great news. We're sitting on decades of reserves, and its just waiting to be used. From the standpoint of prices, news like this is going to continue to put downward pressure on prices until increased demand returns to the market.

I'm still long UNG, and it appears it will take some time for prices to recover. We're still in a traditionally slow time in the season, and it typically picks up as we head closer to fall. I'll continue to monitor this story.

Disclosure: Long UNG

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