Palmerton Group

• Environmental Risk Management
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• Remediation and Site Closure
• Marcellus Shale Gas
  • Facts and Statistics
  • What You Need to Know
  • Implications and Opportunities for Companies
  • Supply and Demand
  • Pipeline and Storage
  • Companies Entering the Play
  • How Do I Enter the Market?
  • Environmental Due Diligence
  • Frac Flow-Back Water Study
  • Related Links
• Water Resources and Groundwater
• Sediment Management
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Marcellus Shale Gas — Supply and Demand

The fundamentals of Marcellus development are based on two things; demand and infrastructure. We know that the gas is there and that it can be extracted. The key is developing markets for the new supply and getting the supply to those markets.

According to Andrew Bradford of Bentek Energy, as long as local governments support drilling activities and keep regulatory and tax policies favorable for field development, the supply will come online. The traditional flow of gas from Canada, the Gulf States, and the Midwestern U.S. to the Northeast will be challenged. It is also likely that Gulf Coast imports to the Northeast will drop significantly and pipelines from the Midwest will be reversed to carry supplies westward. This is also inevitable for pipelines from Canada to the Northeast; Statoil recently announced an agreement to reverse a pipeline beginning in 2012 to carry gas from Marcellus to Ontario. Many other pipelines are already showing transport volumes dropping 60%+.

Growing demand for natural gas will help ensure that market prices maintain stability and the development of the Marcellus Field continues as projected. Key demand growth drivers will be power generation and transportation. According to Raymond James, an energy industry analyst, given the simplicity of gas-powered electric generation, the economics of natural gas extraction through hydraulic fracturing ($4 per MBTU VS $18 for oil) as well as the environmental benefits of fewer emissions, gas projects are and will remain abundant. Many plants that currently use coal are being converted to gas. Most new large scale energy projects in the works will be gas powered and will serve as an important demand driver.

Increased usage of natural gas usage for fleet and rail transportation is also likely, with legislation proposed in both the U.S. and Canada to regulate commercial vehicle emissions. Diesel and natural gas engines are similar in construction and can be converted without significant expense. There are significant cost benefits from making the switch with the only thing holding back demand now is a lack of natural gas filling stations across North America.