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  • rlp2451 rlp2451 Jan 18, 2013 12:54 PM Flag

    OT (Unfortunately for LINE): Utica. Marcellus Could Hold $10 Trillion In Investment

    The Utica and Marcellus shale plays in Ohio, Pennsylvania, West Virginia and New York could represent more than $10 trillion in new economic activity when fully developed, says a new report from a bond rating firm.

    Much of the Kroll report echoes the sort of bullish natural gas development and related economic growth projections that have been common in Ohio since the Utica shale play began to garner attention in 2011.

    For example, the report cites studies that say the Marcellus and Utica shale formations have the potential to become one of the biggest producers of natural gas in the U.S. It mentions a recent study by Ponderosa Advisors, an oil and gas consulting firm in Denver, that projects daily gas production from those formations could grow from 4.2 billion cubic feet in 2010 to 15.4 billion cubic feet by 2020.

    Kroll’s analysis looks not only at the sale of shale gas – and the $20 billion it could add to the region’s economy in 2020 – but indirect benefits such as higher employment, increased tax revenues and improved infrastrcuture.

    “(When those) are added,” the report says, “the overall economic impact could be far greater.”

    It also said the economic and tax benefits from shale development could support higher credit ratings for state and local governments in the region.

    (What is the expected total investment in that little area called the Bakken? Maybe $1 trillion or so?)

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    • Now in Argentina too?

      maybe..34.6 billion boe?

      YIKES!

      All those $ trillions..LOL.

      Madalena Announces an Independent Evaluation of its Unconventional Shale Resources with an Estimated 34.8 Billion Barrels of Oil Equivalent (“boe”) of Petroleum Initially In Place
      Madalena Ventures Inc. (TSXV: MVN) (the "Company" or "Madalena") is pleased to provide information on the Company's unconventional shale resources on its three land blocks within the Neuquen basin, Argentina.

      These resources were evaluated by Ryder Scott Petroleum Consultants Ltd. ("Ryder Scott") in a report dated effective December 31, 2012 (the "Resource Report"). All of the Company's international properties, which are located within the Neuquen basin, Argentina, were reviewed in the Resource Report although not all of the potential resources and formations were evaluated. All values disclosed herein are net to Madalena's interest. Highlights  Madalena holds 135,000 net acres on the Coiron Amargo (35,027 net acres), Curamhuele (50,400 net acres) and Cortadera (49,600 net acres) blocks within the Neuquen basin, respectively;  The main zones of interest for the independent resource evaluation focused on the Vaca Muerta shale,

      Lower Agrio shale and Basal Quintuco with the evaluated resources based on data from 19 delineation and discovery wells on the blocks, 3D or 2D seismic coverage and core analysis.

      The following are summary results of the independent evaluation completed by Ryder Scott for all three blocks held by Madalena.

      A further breakdown (by block) of the petroleum initially in place and potential recoverable resources are shown in a series of tables that follow. 

      Best Case P50 total petroleum initially in place ("PIIP") of 34.8 billion barrels of oil equivalent (“boe”) (51 % crude oil and natural gas liquids ("NGLs")), comprised of:  Best Case P50 discovered PIIP ("DPIIP") of 257.4 million boe (95 % crude oil and NGLs); and

      Best Case P50 undiscovered PIIP ("UPIIP") of 34.6 bi

    • How to Profit From This $10 Trillion Opportunity

      January 25, 2013

      A report put out the other day by the Kroll Bond Rating Agency stated that the Utica Shale and Marcellus Shale plays could represent more than $10 trillion in new economic activity when fully developed. That's a really, really big number.

      While the report raised a number of concerns ranging from methane escaping into the environment to water contamination, it saw the exploitation of these shale formations significantly boosting the economies within its footprint. It noted that this could lead to a domestic revitalization of plastics, pharmaceuticals, and fertilizer, as well as all the energy-related economic output.

      None of this is really new, but it does remind us that there is money to be made by investing in this long-term trend. While there will be many ways to profit from this $10 trillion opportunity, some companies are positioning themselves to deliver long before anyone else.

      Drill, baby, drill!
      The report noted that historical daily gas production is expected to rise from the 4.2 billion cubic feet per day, or Bcfe/d, the region produced in 2010 to 15.4 Bcf/d by 2020, making it the nation's leading production basin. For that to happen, drillers need to be incentivized to increase production, and right now with low natural gas prices that's simply not happening. However, I see two drillers that will see the most effect from a rise in natural gas prices.

      Topping the list is Chesapeake Energy (NYSE: CHK ) the nation's No. 2 natural gas producer. While it has dramatically cut back on drilling in dry gas plays like its 1.8 million net acres in the Marcellus, the company is concentrating on developing its liquids-rich areas, which include an industry leading 1.3 million net acres in the Utica. When taken together, Chesapeake's massive position in the region should yield outstanding long-term results.

      Joining Chesapeake in the region is Range Resources (NYSE: RRC ) and its more than 1 million net acres in the play. The company sees 24 trillion-32 trillion cubic feet equivalent, or Tcfe, of resource potential in its Marcellus acres, with another 10 Tcfe-14 Tcfe of resource potential in its Upper Devonian Shale position. While the company is currently focusing on the super rich and wet gas formations of the Marcellus, over time it too will enjoy the economic benefits of fully unlocking this vast resource's potential.

      Midstream boom
      With production growth in the Marcellus expected to double from 2011 to 2015 there is a significant amount of midstream infrastructure that still needs to be built. It's estimated that the industry will need to spend $20 billion through 2020 to build critical midstream assets. While there are many companies investing in midstream infrastructure, two really stand out.

      While it might be better known as a utility, Dominion (NYSE: D ) has several assets strategically located within the Marcellus and Utica shales. Its gas transmission business has more than 8,000 miles of pipelines, 776 Bcf of underground natural gas storage and 288 million cubic feet per day of natural gas processing capacity. It also owns the Cove Point LNG facility which has the potential to be transformed into a liquefied natural gas export facility.

      Dominion recently entered into a joint venture with Caiman that is focused on growing its midstream presence in the Utica. Dominion is contributing its wet-gas gathering systems, a natural gas liquids pipeline, and its Natrium processing and fractionation facility, whereas Caiman is kicking in the cash to fund the venture's growth. The partners plan to pursue other opportunities within the wet-gas window while also looking at opportunities outside the window to include dry gas and oil gathering.

      Another midstream player to watch is MarkWest Energy Partners (NYSE: MWE ) . It's the largest processor of natural gas in the Marcellus. It also has a large NGL marketing business which includes both truck and railcar assets, as well as its Mariner West ethane pipeline project which is under construction. In the Utica, like Dominion, it has a joint venture which includes processing, fractionation, and storage assets. MarkWest has an exceptionally strategic position from which it can grow as these plays develop.

      Just one word: plastics
      While methane, which is used to heat our homes, is the primary component of natural gas, ethane and propane are also very important components. Among other things they are a feedstock to the petrochemical industry in making plastics. The shale gas boom is beginning a renaissance within the industry as it has several new projects under construction to take advantage of these cheap feedstocks.

      While NGLs will travel by pipeline to the petrochemical industry along the Gulf Coast, as well as to export facilities along the East Coast, some of the liquids will be consumed in the region's first ethane cracker. That petrochemical complex which is still under consideration by Shell (NYSE: RDS-A ) would be a world class facility. Plans currently call for the facility to be built in the rich gas portion of the Marcellus with close access to the Utica. Once built it'll not only deliver economic benefits to Shell but to the region's other producers.

      • 3 Replies to rlp2451
      • A report from who?

        "According to Wood Mackenzie, the Utica will only be producing an average of about 200,000 barrels of oil per day by 2017 – just a fraction of the 1.15 million barrels a day the Eagle Ford will be producing, according to the consultancy's projections.

        Major operators selling Utica assets
        Not surprisingly, some of the play's biggest leasehold owners are putting their acreage up for sale. Chesapeake Energy, the play's largest leasehold owner, recently put 94,200 acres up for sale. Though the company, which discovered the Utica in 2010, was initially extremely optimistic about the play's potential, it has since scaled back its expectations about how much oil the play might contain.

        Even though recent asset sales seem to indicate that the Utica's prospects are fading, not all hope is lost. Some operators' results for natural gas and natural gas liquids have been quite impressive, suggesting that the Utica may simply turn out to be a gassy play with greater quantities of gas liquids as opposed to oil.

        And even though some efforts at coaxing oil from deeper regions of the shale haven't panned out too well, that doesn't necessarily mean the play should be written off for oil just yet. If operators can find ways to overcome the challenges of getting oil flowing through rock, there may still be a way to produce quite a decent bit of oil.

        Though Chesapeake may have scaled back its expectations about the Utica's oil potential, the company still has a handful of core holdings, including the Eagle Ford, to help it transition away from natural gas production and toward oil. Will the company manage to meet its oil production target and boost cash flow?

      • WOW.....
        It seems that you just keep changing your mind.

        First EVEP was "special"...... but, then
        this:
        "How to Profit From This $10 Trillion Opportunity

        January 25, 2013

        A report put out the other day by the Kroll Bond Rating Agency stated that the Utica Shale and Marcellus Shale plays could represent more than $10 trillion in new economic activity when fully developed. That's a really, really big number.

        While the report raised a number of concerns ranging from methane escaping into the environment to water contamination, it saw the exploitation of these shale formations significantly boosting the economies within its footprint. It noted that this could lead to a domestic revitalization of plastics, pharmaceuticals, and fertilizer, as well as all the energy-related economic output....."

        Then you mentioned that "things change"....maybe like the several companies who are trying to sell their Utica acreages.

        ........to now it seems that it is all just no good.....so, what exactly causes all of these changes in your "opinion" about that area?

        Is it the just changes in the wind direction or maybe some SA author?

        Guess it is no longer the $10 Trillion Opportunity that you posted about.

        You remember,
        ....where you said LINE was just going to miss out....(gee, are we worried?...).... since they sold their Marcellus properties in 2008?

        Well,
        .....maybe LINE will do much better anyway in all the Hogshooters, Permian basin, Bakken/Three forks, Hugoton, Green River & the Monterey shales.

      • Is really really angry again.

    • The ten trillion is over the next several decades, dumbo. Not this year. But then I know your narrow-mindedness can't think that far.

    • Executive Summary
      This update examines the proposed high-volume hydraulic fracking of the Marcellus and Utica Shale Basins, located below New York, Ohio, Pennsylvania, and West Virginia, as it relates to state and local credit risk.

      KBRA views the ongoing development of the Marcellus and Utica shale formations as having the potential to create a significant number of new jobs (direct and indirect), as well as improving economic conditions and tax revenues for the state and local governments that lie above the boundaries of the Basins.

      These improvements could support higher credit ratings for issuers in the affected areas, as they reflect key credit characteristics #$%$ed by KBRA in its rating review for state and local governments. Currently, Ohio, Pennsylvania and West Virginia support fracking and are in various stages of developing this industry. New York banned fracking in 2008 pending further analysis. Until there is more available information and experience in each of these states, KBRA cannot #$%$ the impact fracking will have on state and local budgets. However, it will continue to monitor developments in the industry and take rating actions as appropriate.

      If fully developed, these (recently economically) recoverable natural resources could represent in excess of $10 trillion in additional domestic economic activity. In addition, development of shale oil and gas could also allow the U.S. to greatly reduce its dependence on imported foreign oil and enhance national security.

      The estimated economic impact from the recovery of these fossil fuel resources is so large that many economists predict it could materially reduce unemployment and add to the nation’s GDP for decades.

      It could also lead to a domestic revitalization of the plastics, pharmaceutical, fertilizer, manufacturing and other industries that need access to low cost energy and/or fossil fuel feedstock.

      Current estimates indicate that there could be trillions of dollars in new wealth generated from the recovery of domestic shale formations. In fact, many economists say that fracking will soon fundamentally shift global economics to uniquely benefit the United States.

      The focus of this particular KBRA report is not on the national implications but on potential changes to municipal finance stemming from the development of the Marcellus and Utica shale formations (see map on cover), located in the Northeast.

      Studies on the Marcellus and Utica basins have indicated that, combined, these two shale formations have the potential to become one of the biggest producers of natural gas in the nation. Ponderosa Advisors, an oil and gas consulting firm, recently projected that daily gas production (see charts on the following page) from Marcellus and Utica could grow from 4.2 billion cubic feet (Bcfd) in 2010 to 15.4 Bcfd by 2020. (Production in the Rockies, including Williston, are forecast to grow from 9.6 Bcfd in 2010 to 9.9 Bcfd in 2020).

      If these projections are even remotely accurate, development of the shales could result in the creation of thousands of new jobs in Pennsylvania, Ohio, West Virginia and New York. Indeed, Wood Mackenzie predicts that the shale gas industry could support over 300,000 jobs in those four states by 2020.

      At $4/MCF (thousand cubic feet), revenues from just the sale of shale gas could add over $20.0 billion to the region’s economy in the year 2020.

      If the indirect benefits from higher employment, increased tax revenues and improved infrastructure are added, the overall economic impact could be far greater. A recent study by IHS-Global/Cambridge Energy Research, a major energy consulting firm, states that drilling
      added $4.1 billion to Ohio’s GDP and $911.0 million to its tax revenues in 2012. This could climb to $18 billion and $4.6 billion, respectively, by 2020.

      All these new gas and oil riches have not gone unnoticed and many states could use the projected additional tax revenues both to enhance their current economic positions and/or set aside funds for future generations. Either of these would have positive potential rating implications.

      North Dakota, which is now the second largest producer of oil in the U.S. due to the fracking of Bakken formation in the southwest corner of that state, created a Legacy Fund in 2010 and expects to have $1.3 billion set aside by mid-2013.

      Utah voters just approved a new constitutional amendment requiring the placement of up to half of new energy revenues into a trust fund. And similar ideas have been raised in Pennsylvania, Ohio and West Virginia, as well as several other states.

      An often cited example of how these funds can benefit states and their municipalities is the Alaska Permanent Fund, which pays cash to residents ever year ($878 in 2012) from energy taxes and royalties, and also helps the state to subsidize non-fossil fuel power sources such as the Bradley Lake Hydro project.

      Created in 1975, Alaska’s fund is now over $40.0 billion. Several other states, such as Texas, Wyoming, and New Mexico, also have large trust funds.

      But far and away, the world’s largest fund is Norway’s, worth approximately $650 billion.
      Norway established The Petroleum Fund’s Advisory Council on Ethics by royal decree in 2004 to set standards for the fund’s use. Accordingly, the Ministry of Finance issued regulations on the management of the Government Petroleum Fund that include ethical guidelines. State-sponsored funds, managed using ethical guidelines similar to Norway’s, could help to ameliorate some of the opposition to fracking. A portion of the funds’ earnings could even be specifically earmarked for environmental enhancements.

      Of the four states sitting above the Marcellus and Utica shale formation, New York is the only one that currently bans high-volume hydraulic fracturing. Fracking is probably the biggest environmental question, and most contentious issue, currently facing Albany. New York’s decision is being closely watched nationally.

      The State has taken a cautious approach in an attempt to ensure that science is the primary consideration when measuring the costs and benefits of fracking. The fracking issue is politically complex and many laud the governor’s “lets hold off till we know more” position and believe the ban enacted in 2008 was prudent. But the pressure placed on him, both by industry and others, is tremendous, as is the allure that fracking could bring jobs and tax revenues to an economically
      struggling region of the State. In August, Mayor Michael Bloomberg gave his support to “safe fracking”.

      And the issue even came up in the 2012 presidential debates, in which both candidates supported fracking Expectations were that the DEC would lift the 4½ year ban by the end of February 2013, and require far more stringent regulations and permitting requirements. However, the ban may be extended while the state awaits the results of a newly appointed health review board. New York will also need time to develop the infrastructure required to adequately monitor fracking activities in the State if the ban is lifted. If done carefully, fracking could be of significant economic benefit to New York and many of its western municipalities.

      Even if approval is given by the DEC, few in the industry expect to see a NY shale boom in the near term such as that occurring in Pennsylvania. The new regulations and permitting process will be far more complex and the DEC will almost certainly maintain a moratorium on any fracking near either the New York City or Syracuse watersheds. Given the significant capital investments needed to develop these resources (an IHS study predicts nearly $1.9 Trillion in shale gas capital expense between 2010 and 2035 on a national basis), the industry is likely to take a slow approach, fearing legal challenges; court imposed injunctions on permitting and a well-organized amalgam of grass root organizations opposed to any fracking even with far more stringent environmental requirements.

      What remains unclear is if New York has set an example of a high regulatory bar that should be emulated by other states before allowing high-volume fracking to begin. However, even if the ban is lifted with far more stringent regulation, the State may have become so polarized that that fracking never becomes economically viable in New York and the potential economic benefits are never realized. Further complicating the picture is the role local governments will play in this process. Dozens of New York communities have enacted bans on drilling, which the industry says are invalid, stating that only the State can regulate oil and gas development..

      Conclusions
      “Fracking is happening and it’s not going to stop, so we have to take the high road of good regulation and taxes so communities are better off, not worse off, after it’s done,” stated Ted Boettner, executive director of the West Virginia Center on Budget and Policy in a USA Today article.

      Barring any new adverse findings, it appears that the vast majority of states will go forward with high-volume hydraulic fracturing. The International Energy Agency forecasts that over the next few years the U.S. will become the No.1 producer of natural gas and oil in the world, overtaking Russia and Saudi Arabia, respectively.

      This trend should have a significant positive credit impact on most of the states (and several of the
      municipalities within them) that are able to go forward with high-volume fracking, including Ohio,
      Pennsylvania and West Virginia. Oil and gas production is regulated and taxed almost entirely by state and local governments. The federal government’s role is largely advisory, except on federal lands and on interstate pipelines (see page 7 of our report dated January 13, 2012, for a ranking of the states potentially impacted).

      While the inflow of revenues from fracking could materially enhance the economic profile and tax collections of a large number of states and municipalities, KBRA will also take into account the potential environmental and mitigation costs, which in some locations could significantly offset or even exceed the economic benefits from fracking.

      Some of the environmental costs of fracking are subjective in nature making it far more difficult to quantify and ascertain the costs of mitigating them. A stronger local economy, increased tax revenues, and more jobs may not always translate into a better “quality of life” for residents living near newly erected fracking facilities. KBRA’s primary consideration in our rating evaluations is an issuer’s ability to make timely payment on their financial obligations. Solely from this perspective, the economic and revenue enhancements from fracking are likely to lead to higher credit ratings over time.

      Projections of enhanced revenues and the financial impact from the development of the Marcellus and Utica Shale vary significantly depending on the source cited. The Pennsylvania Department of Community and Economic Development posts on its web page that recoverable gas just in Pennsylvania could exceed $500 billion

      Even low-end estimates indicate material improvements in financial positions and ability to make
      debt service payments. Although the confidence intervals surrounding these estimates vary significantly, all three states, Ohio, Pennsylvania and West Virginia, and many of the municipalities located within them, could see improvements to their financial positions and ability to meet debt obligations over the next few years.

      The implications for New York State and its municipalities, which are among the largest issuers in the taxexempt market, remain in flux at this time. Even if the fracking ban is lifted, the extreme opposition that has emerged within the State may limit or prevent development of this natural resource. KBRA will closely monitor the development (or lack) of shale oil and gas resources in New York.

      For additional information please contact Kroll Bond Ratings, New York Office, 845 Third Avenue
      Fourth Floor, New York, NY 10022
      (212) 702 0707

      • 3 Replies to rlp2451
      • If natural gas is currently being sold below the marginal cost of production - which it is and why rigs have fallen off -

        What clown would assume regulations meant to hinder operations and higher taxes would be the high road rather than the mechanism which drives the jobs and economic activity to a more common sense and fair minded state?

        Clearly this person does not understand there is so much natural gas in America it is a commodity, responding to free market economics.

      • How does one get to $10 trillion. Easily. Too bad some people's peabrains can't think outside the box.

        Call Kroll and ask them but it isn't hard to get to the ten trillion.

        But here are a couple hints:
        Multiply 300,000 jobs times the annual average salary in an oil job, then times twenty years.

        Multiply the infrastructure investment times the same number of years,

        Then take the value of the products and include that amount.

        Then take the velocity of money and multiply the above amounts by that.

        Don't forget to include royalty and lease payments, tax revenues, pipeline/transportation revenue, end product revenue (throughput from NGL processing facilities, refineries, potential NG exports), etc.

        Ten trillion is likely an underestimate. But I suspect you can't count that high. And that's all I'm saying about it.

      • You can post and repost all the reports you like...but the numbers do not add up.

        You can check it easy enough but you avoided the USGS numbers for recoverable reserves for the Marcellus & the Utica that i posted.....I realize that it is easier to just post some report and hope that it is believed...but if you do the math....the numbers do not even come close.

        Look at this part of your post for example:
        At $4/MCF (thousand cubic feet), revenues from just the sale of shale gas could add over $20.0 billion to the region’s economy in the year 2020.

        If the indirect benefits from higher employment, increased tax revenues and improved infrastructure are added, the overall economic impact could be far greater. A recent study by IHS-Global/Cambridge Energy Research, a major energy consulting firm, states that drilling
        added $4.1 billion to Ohio’s GDP and $911.0 million to its tax revenues in 2012. This could climb to $18 billion and $4.6 billion, respectively, by 2020.

        So....how do you get to $TEN TRILLION from that?

        That report by a bond rating company....estimated a number that is about 2/3 of the entire USA GDP....and is based on a bunch of what ifs, maybe this some days...read the qualifying language in the post.

        Let us know what you calculate after you use the USGS reserve numbers to show just how off the report's numbers actually are....or,

        ........ if you can't do the math to check....send ALL of the threads to the report-writer with the USGS reserve quantities and ask them to apply the USGS reserve estimates and to check the basis for their report number of $Ten Trillion because some do not see it as credible.

        Lets see some numbers....not merely what someone hopes might happen.

    • Responses to this topic are nothing short of asinine. To simply assume the report only focused on the economic value of the product and ignore the immense investments in infrastructure (clearly referred to in the article), continuing jobs and job growth, tax revenues, etc., shows how simple minded people here are. I refuse to even acknowledge such imbecility.

      • 1 Reply to rlp2451
      • The Texas data does take all of that into consideration.....maybe you should go spend some time reading the Texas report.....posted by U Tex at Austin.

        This is a good one:
        "I refuse to even acknowledge such imbecility."

        So much like your usual routine.

        Oh, when you do calculate the USGS estimated quantities for ALL of the Marcellus and add ALL of the Utica.....

        if you remain still unconvinced....then multiply by TEN and you will see just how far off that report you posted about may be off.

        BUT,
        I do not think that you think that anyone will actually check these numbers.....pretty easy to check....still have that old calculator?

        TEN TRILLION is that a one with 13 zeros after it?

    • Why did you edit the article, and not include this part?

      "But the analysis by Kroll Bond Rating Agency in New York also cautions that the oil and natural gas shale boom is “fraught with a multitude of environmental and health issues” related to hydraulic fracturing, or fracking.

      It said concerns over methane escaping during drilling, water use in fracking operations and potential contamination issues all need to be adequately addressed. New York has banned fracking since 2008 pending more study of those issues."

      But much of the Kroll report echoes the sort of bullish natural gas development ....etc

    • Sounds great.....

      This is the key:
      "could represent....etc"

      So,
      while the area continues to grow, please let us know if it gets close to the production of CA, then AK, then ND, and then TX...I guess that KS, WY & OK will fit in there also somewhere.

      Please let us know how things progress.

 
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