The Marcellus Shale Gas play has been a popular area of research and investment over the past 10 years. It is commonly cited as the largest shale gas play in the United States with an estimated recoverable gas of 141 TCF; 50 TCF in Pennsylvania. Because of this Marcellus will doublessly have a significant role in meeting the U.S. energy demand in the future. Horizontal drilling with multistage hydraulic fracturing have made production from Marcellus technically achievable though the permeability across the shale formation ranges from 400 to 800 nano-Darcy. Recently, the down-turn of the natural gas market has led to a drastic reduction of rig count in Marcellus, and operators have seen reduced economic performance. This paper presents an after tax economic analysis model for an average shale gas, condensate, and oil well in the liquid rich areas of Marcellus Shale, which can potentially be used to determine the profitability of developing within Marcellus formation. Both deterministic and stochastic economic models are presented. Production decline, cost of drilling, cost of completion, leasing operation expense, effective tax rate, as well as current and future petroleum prices are all incorporated. A comparison between the economic models built in this study and an existing before tax economic model from literature is also presented. Conclusions regarding the current and future development of Marcellus shale have been proposed based on results from the economic model.
The recent decline in natural gas price has led to shrinkage of the natural gas development in the United States. Operators started to remove or reduce their rig count in the unconventional basins driven by the tremendous expense associated with unconventional resource development and the drop in petroleum price. A comprehensive engineered economic model, which takes into account the operational cost, drilling & completion cost, corporation & severance tax, production decline over the well life and predicted price variation of oil and gas, will guide the decision making process of operators. Models reviewed from literature are not as comprehensive, and some models are not explicitly explained, leaving the reader questioning their methodology and results. This study focuses on building an after-tax economic model with logical and well-documented inputs and explaination for all output. This model can be employed for economic analysis of an unconventional reservoir development with required parameters properly defined. Specifically, this model is illustrated with development in Marcellus, Pennsylvania.
URTeC 1617813
