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Engelder: Marcellus Production Proving Early Detractors Wrong

Production out of the nation's shale plays over the past five years, especially the Marcellus Shale, has proven many early skeptics wrong, according to Terry Engelder, a geosciences professor at Pennsylvania State University who helped spawn interest in the Marcellus through his reserve estimates in 2008.

Engelder said that articles written by Ian Urbina in the New York Times that, among other things, described the shale gas industry as a "Ponzi" scheme whose future would match that of Enron Corp. (see Shale DailyOct. 8, 2012), and dour predictions by anti-fracking groups and environmentalists that the shale gale would quickly fade, don't hold water -- and neither do current critiques that claim some companies have beefed up their shale production numbers in misguided efforts to pay off old debt.

"There's a bunch of stuff out there that I think needs to be debunked," Engelder said during a webinar sponsored by Penn State Cooperative Extension Thursday.

It was Chesapeake Energy Corp. that took much of the heat from Urbina and other shale skeptics -- the company at one point was accused of exaggerating shale gas well productivity and industry reserve estimates (see Shale DailyJune 28, 2011) -- but data gathered since then proves that Chesapeake's petroleum engineers and geologists "really knew what they were doing," according to Engelder. "The decline curves they predicted, without much data...have really held up over time," he said.

Critics in the early days of the shale gale said the natural gas industry was setting itself up for collapse, with reserve estimates supposedly exaggerated and decline curves underestimated. Since then, production out of U.S. shale plays has flooded the market, lowering prices nationally, with reverberations felt throughout the economy (see Shale Daily,Sept. 11Sept. 5May 21). And the Marcellus remains the gold standard of the nation's shale plays.

"The average Marcellus well is going to have a production history that looks to me like it will net somewhere on the order of three times as much gas as the average Barnett [Shale] well, to give an indication of how it's doing," Engelder said.

And nay-sayers have said natural gas shale wells can not pay for themselves. Not true, Engelder said. Cumulative production in Pennsylvania through June 2013 was 4.8 Tcf, enough to pay for 3,409 wells at $3.50/Mcf, assuming leasing is part of the $5 million average well cost, he said.

 "These numbers are soft, I admit, but if you actually take these at face value you can see that roughly 95% of all Marcellus wells -- that includes ones that have only produced for six months to a year -- 95% of all Marcellus wells have paid for themselves, based on early production. Admittedly, gas price goes up and down and there are other costs going up and down, but this gives you some idea just how robust it is."

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