PTTC Workshop Summary Report
Eastern Region – Appalachian Basin
by Doug Patchen, Director
Petroleum Technology Transfer Council Resource Center for the Appalachian Region
Title/Topic: “The Impact of Utica-Marcellus on American Natural Gas Resource”
Date: September 19, 2016
Location: Pittsburgh, PA
Co-Sponsor: The Potential Gas Committee; Golden, CO
This workshop was designed to create a flow from upstream gas production and resource assessments, to midstream infrastructure needs, to downstream potential for a new petrochemical industry and economic development, all due to the Marcellus and Utica Shale plays.
The workshop was a collaboration between the Appalachian basin PTTC and the Potential Gas Committee (PGC), the only remaining organization that produces and publishes an assessment of the nation’s natural gas resource on a regular (biennial) basis. 2016 is a reporting year; data being collected now with be released in the spring 2017 report. This workshop provided a first look at the shale assessments.
Resource numbers for these unconventional plays have increased dramatically during the past 10 years for the Marcellus, and more recently for the Utica, due to an escalation of drilling, production and success in broader areas of the basin. With this upstream success, a need to upgrade and expand the midstream infrastructure to move the gas has been and continues to be addressed. In addition, confidence in the long-term stability of the plays has led to significant business decisions in the downstream end. All of the above have had a significant impact, not only in the Northeast U.S. region, but in the entire country.
The program began with two keynote addresses by Porter Bennett, President of Ponderosa Advisors LLC and a member of the PGC, and Joseph Frantz, Vice President of Engineering Technology at Range Resources. These were followed by resource assessments of the Utica and Marcellus prior to the lunch break.
Bennett made the following key points: we have entered the world of abundance, with too much oil, gas and NGLs relative to demand, creating a need for more global demand; oil and gas prices have reconnected because many wells produce both commodities, so the price of one impacts the price of the other; current crude prices do not support sufficient associated gas production; rising natural gas prices will lift the economic performance of dry gas plays, and also some predominantly oil-focused basins, thus changing inter-basin competitiveness; and the Utica and Marcellus will increasingly dominate the U.S. market.
Frantz cited the unprecedented shale production since 2006, supply and demand as a result, rig counts, and pipeline flow from the Utica and Marcellus, before launching into a discussion of Upper Devonian, Marcellus and Utica stacked plays, and the advances in technology that is driving each play. He mentioned multiple wells per pad; core analysis leading to improved landing zones; gains in efficiency in horizontal drilling; advances in completions (with increased environmental awareness); improved water management; reducing vapor emissions; and advanced reservoir modeling.
The next section of the program was dedicated to discussions of the geology, play development and estimated resource of the shale plays: the Marcellus and Utica (with the deeper, still emerging Rogersville later after lunch).
Our featured luncheon speaker was Mike Decker, who began with the distinction between proved reserves and resources, and followed with the increase in recent years in proved reserves and production, which led to a decline in gas imports. He then described the composition and the work of the Potential Gas Committee to produce updated assessments of the nation’s gas resource every two years, and provided the 2014 number: 2903.7 Tcf for the nation’s total gas supply.
The afternoon session featured discussions of the evolution of shale plays due to advances in geology and engineering, and how this has affected public perception: how the industry has changed during this time of natural gas abundance; and the need for mid-stream infrastructure to move the gas to market – and to sites for new industrial development.
Chris McGill discussed the effect of natural gas abundance on policy, both within government and within groups opposed to developing and burning fossil fuels. His take-away points included: CO2 emissions from natural gas will surpass those from coal in 2016, but this will be due to utilizing lower-carbon energy, and is not a problem; the increased use of natural gas is consistent with and supports a lower-carbon future; if policy drives more efficient natural gas as a replacement for inefficient equipment and more carbon-intensive fuels, then emissions will be lower; many states have programs to encourage switching to natural gas to improve energy savings and to reduce emissions; and the direct use of natural gas in homes and businesses should be considered to be a greenhouse gas reduction strategy at the federal, state and local level.
Roger Willis illustrated the change over time in best practices applied in the field, and ended with examples of what we think we know and what we really do not know regarding optimized hydraulic fractures. Because the world is complex, there is a tendency among modelers to make simplifying assumptions concerning reservoirs, induced fractures and flow regimes. However, many of these assumptions are demonstrably false, or at least imperfect. Reservoirs contain heterogeneities, frac geometry is complex, not all fracs demonstrate sustained hydraulic continuity, thus the need to design more conductive fractures.
Bob Riga described how increased natural gas production from the Marcellus and Utica have changed the dynamics of pipeline flow from flow to the northeast to flow away from the Appalachian basin to the south and northeast to New York and New England. However, due t increased demand there is a need for additional pipelines to move gas out of the area. This need will intensify as both supply and demand continue to increase in the region during the coming decades. He completed his talk with maps illustrating projects by several pipeline companies to alleviate the situation with new construction.
David Spigelmyer discussed the state of the industry in the region, including the number of currently producing shale wells, current monthly production, and market conditions, such as capital retraction with decline rig counts, upstream job reductions and supply chain pressure, and the negative impact of calls for increased taxes and new regulation on investment stability. He also demonstrated the benefit to the nation in providing necessary fuel; the decrease in energy cost to consumers due to higher gas production; and health benefits from burning natural gas rather than coal. He closed with new market opportunities such as transportation, electricity generation, exports and feed stock for industries leading to a rebirth of manufacturing.
Spigelmyer’s final slide served as an introduction to our final speaker, Brian Anderson, whose topic was the Appalachian Storage Hub, specifically what we need to store and maximize the development and use of liquid ethane. The supply of ethane and other NGLs in both the Utica and Marcellus plays has led to announcements of three cracker plants in the tri-state corner of PA, OH and WV. One possibility is to move the NGL products to the Gulf Coast through pipelines. Another is to build a pipeline system to move the product to local manufacturing centers in northeast KY and southern WV. A subsurface storage facility will be an important part of this pipeline system.
The Appalachian Oil & Natural Gas Research Consortium has initiated a study of the geologic options for creating a storage facility to hold liquid ethane and potentially other NGLs at some point along the proposed pipeline from southwest PA to KY and WV. Options include creating salt caverns in the Salina salt; subsurface mining of the Greenbrier Limestone; and injection into depleted and abandoned natural gas fields at various stratigraphic intervals, ranging from Lower Mississippian to Cambrian. The study will conclude in mid-2017, with the facility under construction by 2018.
The workshop program, with titles, speakers and their affiliations, follows.
08:00 On-site registration begins
08:45 Welcoming Remarks – Doug Patchen, Director, Appalachian Basin PTTC & Ron Kelley, President, PGC
09:00 Keynote address: Natural Gas? NGLs? Oil? Who is Leading Today? – Porter Bennett, President and CEO, Ponderosa Advisors LLC
09:45 How Technology, Governments, Regulators, Academia and the Public Have Changed the World’s Energy Supply and Demand Equation – Joseph Frantz, Jr., Vice President Engineering Technology, Range Resources
10:30 Coffee break
10:45 Marcellus Resource Assessment – Svetlana Ikonnikova, John Browning, Frank Male, Gürcan Gülen*, Katie Smye, Guin McDaid, and Scott W. Tinker, Bureau of Economic Geology, The University of Texas at Austin
11:30 Utica Play Resource Assessment – Michael Ed. Hohn*, Director; Susan Pool and Jessica Moore, West Virginia Geological Survey
12:45 Luncheon Speaker: U.S. Gas Resources and Reserves – A Discussion of the 2015 Potential Gas Committee Resource Assessment – Mike Decker, Executive Vice President & COO, Badlands Energy
01:00 brief break
01:15 Rogersville Shale Play & Resource – David Harris, Head, Energy & Minerals Section, Kentucky Geological Survey
01:45 Framing the Appalachian Shale Evolution through Geology, Engineering and Public Perception – Roger Willis, President (retired), Universal Well Services
02:30 The Shifting Sands of Natural Gas Abundance – Chris McGill, Vice President Policy Analysis, American Gas Association
03:00 Coffee break
03:15 The Need for New Northeast Pipeline Infrastructure & Spectra Energy’s Solutions – Bob Riga, General Manager of Northeast Business Development, Spectra Energy
03:45 Industry Update – David Spigelmyer, President, Marcellus Shale Coalition
04:15 Brian Anderson, Director, WVU Energy Institute – The Appalachian Storage Hub
04:45 Evaluations and Certificates for PDHs (6)
05:00 Workshop ends