Gas Estimate Reduced for Marcellus Shale

Department of Energy Cut Marcellus Forecast

The department of energy has cut it’s estimate of natural gas reserves in the Marcellus Shale.  This reduction could affect Marcellus Shale mineral owners if operators decide to reduce drilling activity in the area.  While it’s not clear what impact the reduced estimate will have on operators, there is not likely to be any immediate change in leasing activity.  As operators take this reduced forecast into consideration, the impact could be seen in 2013 and beyond after operators adjust their future drilling plans.

The DOE cut it’s original estimate of 410 trillion cubic feet to just 141 trillion cubic feet.  The DOE cut it’s estimate based on data from drilling operations in the area.  As operators have been drilling in the Marcellus Shale, more information about production has become available.  This additional information has allowed the DOE to more accurately forecast the total amount of reserves available.  While the reduction from 410 TCF to 141 TCF represents a 65.5% decrease, operators will continue to prove reserves in the immediate future so this estimate could be revised higher or lower.

The Marcellus Shale has represented a significant amount of the new activity in the Oil & Gas industry and industry experts expect this activity to continue into the foreseeable future even with this reduced estimate.  Many times a new Oil & Gas basin or play such as the Marcellus Shale will remain active even after negative results are observed so that operators can accurately determine the full potential of the basin.

Mineral owners in the Marcellus Shale are advised to closely watch the reserves estimates as they will have a direct impact on future leasing potential.  If the estimates continue to trend downward, this could have a negative impact on both the lease bonus amounts operators are willing to pay in the Marcellus Shale as well as the royalty payments.

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