“Fully developed, the Marcellus Shale has the potential to be the second largest natural gas field in the world,” after the South Pars/Asalouyeh field in Iran and Qatar, according to a report, “The Economic Impacts of the Pennsylvania Marcellus Shale Natural Gas Play: An Update,” released Tuesday by three professors of the Pennsylvania State University College of Earth and Mineral Sciences.

The report, prepared for the Marcellus Coalition of natural gas producers and suppliers, estimates that the natural gas found in the shale play “could be equivalent to the energy content of 87 billion barrels of oil, enough to meet the demand of the entire world for nearly three years.”

Production in the Pennsylvania portion of the Marcellus, estimated at an average of 327 MMcf/d in natural gas and equivalents in 2009, is projected to reach an average of 1 Bcf/d during 2010, approach 2.5 Bcf/d during 2011 and exceed 13 Bcf/d in 2020, according to the study.

The study credits the absence of a severance tax in Pennsylvania for the rapid natural gas development in the state and warns that establishment of a severance tax could put the Marcellus Shale at a competitive disadvantage compared to shale plays in other locations. The Pennsylvania governor and other state politicians have threatened to install a severance tax. The move is opposed by the 91-member Marcellus Coalition, which says it already pays taxes to state and local governments in addition to royalties and lease bids.

The report estimates that Marcellus gas producers spent a total of $4.5 billion to develop the resources in Pennsylvania in 2009, and, based on an input-output model used by the state labor department, that spending generated $3.9 billion in value added, $389 million in state and local tax revenues, and more than 44,000 jobs. Value added could reach $14.4 billion in 2015 when production reaches 7.6 Bcf/d and $18.8 billion in 2020 when production reaches 13.5 Bcf/d. Added jobs would escalate from 111,413 in 2011 to 211,909 in 2020.

The report was prepared by Timothy J. Considine, who is a professor of energy economics in the department of economics and finance at the University of Wyoming (Considine was formerly a professor of natural resource economics at the Pennsylvania State University), and Robert W. Watson, emeritus associate professor of petroleum and natural gas engineering, and Seth Blumsack. assistant professor of energy policy and economics, both in the department of energy and mineral engineering at Penn State.

The report can be found at www.marcelluscoalition.org.

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