May 18, 2008 By James Pletcher Jr. 7 min read

It may be the new gold rush. Technology has opened the way for drillers to tap into what could be one of the most significant natural gas fields in history, offering trillions of cubic feet of fuel.

Known as the Marcellus shale, the field runs from the southern tier of New York, through the western portion of Pennsylvania, into the eastern half of Ohio and through West Virginia.

Formed about 400 million years ago during the Devonian period, the Marcellus shale is a mapped sedimentary bedrock unit found throughout the Allegheny Plateau region of North America. It is named after an outcrop found near Marcellus, N.Y., during a geological survey in 1839.

The Marcellus is receiving new interest from the energy development community as a potential source of large quantities of recoverable natural gas.

New technology is allowing gas companies to drill a vertical well to the Marcellus and then turn the equipment to continue drilling horizonatally to free the gas trapped in the black shale.

“The resource is as valuable as anything that Pennsylvania has had since the early days of coal and even going back to Titusville (site of the first oil well),’ Terry Engelder, professor of geosciences, Department of Geosciences, at Penn State University in University Park, said.

Engelder, working with Gary Lash, professor of geoscience, SUNY Fredonia, has conservatively estimated that the Marcellus shale contains 168 trillion cubic feet of natural gas in place and optimistically suggests that the amounts could be as high as 516 trillion cubic feet.

The U.S. currently produces roughly 30 trillion cubic feet of gas a year, and these numbers are dropping.

According to Engelder, the technology exists to recover 50 trillion cubic feet of gas from the Marcellus, thus keeping the U.S. production up. If this recovery were realized, the Marcellus reservoir would be considered a super giant gas field.

So, in terms of what the Marcellus may contain, Engelder said, “The drilling and exploration of the Marcellus shale is the tip of an iceberg in fog so people aren’t even sure what the tip is because so little of it has been recovered in relation to what we think is in it.

“The potential resource is in four states, western New York, eastern Ohio, Pennsylvania and West Virginia. We call it a potential resource because the area it covers, the formation potentially carries gas, which is very large. The gas companies have yet to prove its commercial presence in many areas.

“There are a lot of companies that are thinking very hard about this,’ he added.

One of those is Atlas Energy Resources LLC, which, in February, officially opened its new $2.3 million, 24,000-square-foot Fayette District facility in the Fayette Business Park near Smithfield.

Atlas Energy develops and produces domestic natural gas and to a lesser extent, oil. It is, according to Richard D. Weber, president and CEO, the second-largest gas well producer in Pennsylvania and the largest active drilling company in the state.

Weber explained that Atlas Energy is well positioned in the emerging Marcellus Shale field, which is a black, organic rich blanket shale formation found throughout much of western Pennsylvania.

“We drilled our 58th well in the Fayette District,’ Weber said.

“We are drilling both vertically and horizontally, he said, adding that its costs about $1.3 million to drill a vertical well “and to drill a horizontal well could cost as much as $4 million.

“We are hoping that these wells will produce much higher volumes of natural gas. The results so far show there are higher reserve levels of gas in the Marcellus.

“There is no question that the Marcellus is for real and will be a very important source of natural gas for Pennsylvania and the northeastern U.S. Our company is going to spend over $200 million in the next year and a half drilling these wells,’ Weber said.

So far, he added, Atlas Energy Resources has about 250,000 acres under lease in southwestern Pennsylvania, “which includes Fayette, Greene Westmoreland and part of Washington counties. We think we will recover four to six trillion cubic feet, which is five times greater than what we have in reserve now.’

Weber also pitched Atlas Energy as the company local people should look to for leases.

“I would like to think the people of Fayette County would look to us for drilling. We employ many local people and when people look to lease their acreage, we’d like to think they would give the edge to the local guy and the number-one producer in the Marcellus shale.’

Engelder said other companies are also drilling in the Marcellus. One is Range Resources in Washington County, “and in West Virginia there is some extensive production from the Marcellus, although a lot of that is based on commingling gas from other layers.

“On the Fayette and Greene county border there is some activity and there appears to be nice potential for production in Susquehanna County,’ he said.

“The potential exists between Susquehanna and Greene county. There are a lot of areas yet to be fully tested and understood. This is why we call it a potential resource. There has certainly been a number of wells drilled Greene County that have shown Marcellus contains gas. The question is whether or not it can be made commercial.’

Other energy companies that have announced plans to drill the Marcellus are Rex Energy Corp., Equitable Resources Inc. and CNX Gas.

“The rule of thumb is a horizontal well costs three times as much at least for vertical well and may be four times as much by the time all is said and done,’ Engelder said.

He estimated that it costs about $800,000 to drill a typical vertical well in the Marcellus field while a horizontal well costs about $3 million.

“The reason operators would do that is the potential for return is greater than four times. Horizontal wells are very difficult to drill and complete and it takes companies some time to learn how to do this. This requires people to be brave and willing to make a fairly major investment,’ he added.

However, he said, the value of this science could “increment the net worth of U.S. energy resources by $1 trillion, plus or minus billions.’

However, Engelder explained there are “three terms the public ought to become familiar with: gas in place, which refers to the total amount of gas present in the rock; the second term is technically recoverable gas, which means the percentage of that gas that one can recover using present economic structure and technology, often the technically recoverable gas is considered to be about 10 percent of the gas in place; and the third term is proof reserves, the numbers a company uses when it’s evaluated based on its drilling and production program, on production or history of production of gas.

“For example, in Washington County, Range Resources has considerable proven reserves. In Clearfield County, the gas in Marcellus would be considered as technically recoverable. These terms in educating public may be most valuable terms,’ Engelder said.

“Conservatively, we generally only consider 10 percent of gas in place as a potential resource,” said Engelder.

“The key, of course, is that the Marcellus is more easily produced by horizontal drilling across fractures, and until recently, gas production companies seemed unaware of the presence of the natural fractures necessary for magnifying the success of horizontal drilling in the Marcellus.”

Engelder, who has studied this area of the U.S. for most of his career and began looking into fractures under a National Science Foundation grant 25 years ago, has identified and mapped natural fractures in the Marcellus shale.

He and Lash presented some of their recent work at the 2008 American Association of Petroleum Geologists Annual Convention and Exhibition this spring.

The Penn State-Fredonia approach is not restricted to production of the Marcellus shale, but can be applied to any gas-bearing shale with this type of fracture.

Because the approach begins with a vertical well and then drills horizontally in the direction that will crosscut the productive

“We can go back to wells that are already drilled and played out, and then drill horizontal from there,” Engelder said.

“Reusing old wells has both economic and environmental value,” he added.

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Online:

http://www.geosc.psu.edu/~engelder/

http://www.atlasenergyresources.com/