Since the first days of the Marcellus gas rush in 2007, nearly everyone has asked: when will the gas rush end? Answering that question requires a simple calculation of dividing the amount of gas that can be produced by the rate at which gas will be produced. So what's the answer?
Using a production rate of three trillion cubic feet per year and the new EIA estimate of 142 trillion cubic feet of Marcellus gas available for production, Marcellus gas production will last at least 50 years. But here are the caveats on the calculation.
Right now Marcellus gas production is ramping up rapidly, but it just crossed daily production numbers that amount to 1 trillion cubic feet per year in 2011. If Marcellus production stayed at that rate, the Marcellus would produce gas for 142 years, given the new EIA reserves number of 142 trillion cubic feet.
If Marcellus gas production reaches the equivalent of 2 trillion cubic feet per year, a highly likely outcome, then Marcellus gas production would last 70 years, if one again uses the new EIA reserves number.
I have assumed that Marcellus gas production will reach 3 trillion cubic feet per year, an extraordinary number. At 3 trillion cubic feet per year, the Marcellus would be providing about 12% of total US gas, but natural gas production would last 50 years at that rate, given a 142 trillion reserve estimate.
Remember we have already completed 5 years of the Marcellus gas rush, if one assumes that it began in 2007. In fact the first Marcellus test well was drilled in 2005.
How certain are these estimates? Reasonably. Today's rate of gas production is known, but it is changing rapidly, going up from 1 trillion cubic feet per year to the next milestone of 2 trillion cubic feet per year. Gas pricing, however, can slow or speed up gas production. Today's pricing were it to continue would slow the rate at which gas is produced and possibly prevent the Marcellus from reaching the 3 trillion cubic feet per year production level.
What about the reserve number of 142 trillion cubic feet published yesterday by EIA in what it calls its reference case for its 2012 Energy Outlook--its annual crystal ball exercise, where the EIA projects our energy future through 2035 by modeling. www.eia.gov/forecasts/aeo/er/? The EIA reference case is built on numerous data assumptions that often change significantly year to year.
One such assumption concerns the amount of natural gas available for production across the country and within regions, and the EIA estimates of these numbers have varied substantially for the last 5 to 10 years. Until this year, the EIA gas reserve estimates used in its annual Energy Outlook modeling had gone up, up, up.
But in its 2012 Energy Outlook EIA projects that the Marcellus gas reserve has 142 trillion cubic feet, down 66% from last year's estimate of 410 trillion cubic feet. This sharp change in the EIA number underlines that the gas reserve estimates are a moving target.
But what difference does the moving target really make? Not much in the real world of gas production and pricing.
Even the much lower new EIA Marcellus reserve number of 142 trillion cubic feet is an enormous number that would take about 142 years to produce at 2011 production rates and will take 50 years to produce if Marcellus gas production reaches an humongous 3 trillion cubic feet per year.
The new EIA estimate confirms that no doubt exists that there are huge amounts of gas in the US and Pennsylvania, while the precise amount will remain mysterious forever. The gas in Pennsylvania goes well beyond the Marcellus for example and includes other formations like the Devonian and Utica.
Pennsylvania has been producing gas for more than 120 years, is now a top 5 gas producing state, and it will be producing large amounts of gas 50 years from today.