Monday, October 22, 2012

Non-Government Studies Indicate Marcellus Reserves Much Larger, 'Grossly Underestimated'

Two, non-government studies of the reserve potential of the Marcellus natural gas field indicate that the region may hold even more vast energy deposits than first thought.  One study, done by Standard & Poor's, states that the sprawling Marcellus shale "could contain recoverable resources equal to almost half of the current proven natural gas reserves in the U.S."

A second analysis of Marcellus reserve data was done recently by ITG Investment Research, and that firm's findings indicate federal government estimates of Marcellus reserves "are grossly understated."

The S&P report notes that the decline in natural gas prices is hurting drilling activity, but this activity should resume, particularly in the Marcellus, once prices rebound:
"Spot natural gas prices are currently below our $3.50/mmBTU long-term price deck, so many operators have put drilling activity for dry gas shale on hold, even in the Marcellus. However, the lower costs associated with development and production of the Marcellus shale means operators are likely to resume drilling in that region first if and when natural gas prices improve. Thus, we believe the Marcellus will be one of the first areas that operators will return to if and when natural gas prices improve, as we expect they will over the next 12-18 months."

Click to read the text of the S&P report and click to read the entire report.