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XTO, MarkWest Look to Shale's Next Chapter

Two industry executives last week lauded the economic success brought about by shale gas development, but warned that continuing success depends in large part upon educating the public about hydraulic fracturing (fracking), training future regulators and policymakers, and being able to export liquefied natural gas (LNG).

"The question now is what will be the next chapter in America's shale success story?" XTO Energy Inc. President Jack Williams asked attendees of the Marcellus Shale Coalition's Shale Gas Insight 2012 Conference in Philadelphia on Thursday. "It's not a question of technologies; the technology for safe and responsible production of shale resources is already here.

"It's whether our industry and government -- and importantly, a willing public -- will take the right steps to ensure our country remains the leader in the field, and so that our citizens' communities can enjoy the full economic benefits of these 'made in America' energy technologies."

Williams, who runs the ExxonMobil Corp. U.S. exploration arm, asserted that shale gas development is expected to support 1.5 million jobs and contribute nearly $200 billion to the national gross domestic product by 2015, figures that are expected to double by 2035.

"This is real economic opportunity for individuals, families and communities in Pennsylvania, Ohio, West Virginia, Texas, Colorado -- every state with shale gas development. And even those without," Williams said. "One out of every five jobs is located in a non-shale producing state."

Frank Semple, CEO of MarkWest Energy Partners, concurred with Williams' assessment during his keynote speech. "The facts are undeniable. Marcellus and Utica Shale development -- along with many other unconventional resource plays in the United States -- are creating hundreds of thousands of good-paying jobs and generating tens of billions of dollars in new government revenue. It's also producing an energy resource that is clean and affordable, and making our nation more energy secure in the process."

But Williams cautioned that for all of its success, the shale gas industry "must take steps to strengthen public confidence. We need to acknowledge that for all the success of shale development, public confidence is not as strong as it could be. Some Americans continue to demonstrate a high level of potential concern about the potential impact of shale development activity on their communities and the environment. This concern persists despite many independent studies affirming the safety of shale gas production, and despite the fact that shale oil and gas are produced every day across the country without significant incident."

ExxonMobil, the No. 1 natural gas producer in the United States, projects global demand for gas to rise 60% between 2010 and 2040 and is forecasting that gas will account for more than 25% of the world's energy usage by 2040, overtaking coal as the world's second-largest energy source (see NGI, Dec. 12, 2011). Demand for natural gas is expected to be driven mostly by power generation, with the global demand for electricity 80% higher than it was in 2010, and 30% of power generation being fueled by natural gas.

"But there is an even bigger opportunity on the horizon for American-made LNG," Williams said. "Just as we do with exports of grain, cars and other American products, by exporting LNG we could create economic value that otherwise would not have existed." ExxonMobil has "partnered with a cooperative venture that has applied to the DOE [U.S. Department of Energy] to explore the potential for exporting LNG," from the Golden Pass LNG receiving terminal in Sabine Pass, TX, a project being developed by Cheniere Energy Inc. (see NGI, April 23a).

"If developed, this project would represent approximately $10 billion of investment, generating billions of dollars of economic growth at local, state and national levels, and millions of dollars in taxes to local, state and federal governments," Williams said. "Exporting some of this North American bounty is not a question of either/or. We can do both."

Semple hinted that the window of opportunity for the United States to export LNG may be a short one, a prospect that has not been lost on industry analysts and government regulators alike (see NGI, Aug. 27; April 23b). He cited statistics from the U.S. Geological Survey which said global technically recoverable shale gas totals approximately 6,600 Tcf, most of it in large basins outside the U.S.

"To date, shale gas development has been largely limited to North America," Semple said. "That's going to change over the next few years. Eager to replicate these enormous benefits, China, Australia and several European and South American countries are exploring for shale reserves." However, "developing these resources will require the use of American ingenuity, experience and technologies, reinforcing the fact that the United States is, and will remain, the catalyst for this global energy phenomenon for years to come."

ExxonMobil, through XTO, is the seventh largest acreage holder in the Marcellus Shale with 660,000 net acres. The play is dominated by Chesapeake Energy (1.78 million net acres), followed by Shell (850,000 net acres), Seneca Resources (755,000 net acres), Range Resources (750,000 net acres), Chevron (714,000 net acres) and Statoil (689,000 net acres). Rounding out the top 10 Marcellus Shale net acreage holders are EQT Corp. (532,000 net acres), Bluescape Resources (490,000 net acres) and Pennsylvania General Energy (439,000 net acres).

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