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The Play: Marcellus Shale
Endless Opportunity in the Endless Mountains
By Cheryl Hudak
The Endless Mountains of northeastern Pennsylvania are part of the vast Appalachian Mountain chain that extends from Alabama to Newfoundland. Geologically speaking, the Endless Mountains are not mountains at all, but a plateau of sedimentary rocks, primarily sandstone and shale. And as a rich source of natural gas, those rocks are creating endless opportunities.
Chesapeake entered the Appalachian Basin in November 2005 with the acquisition of Columbia Natural Resources, a West Virginia based natural gas producer. By early 2008, the company had accelerated leasehold acquisitions and was preparing for its first drilling activities in the basin’s Marcellus Shale formation.
The Susquehanna River runs a wandering course through northeastern
Pennsylvania before emptying into Chesapeake Bay.
The Marcellus Shale, with risked unproved reserves of almost 17 trillion cubic feet of natural gas equivalent, net to Chesapeake, is likely to become one of the two largest natural gas fields in the U.S. Chesapeake has a number-one position in the play, with more than 1.6 million acres of leasehold and 24 operated rigs drilling around the clock.
Chesapeake’s Marcellus Shale drilling began in West Virginia and has since extended northeast to the Endless Mountain Region in Tioga, Bradford, Susquehanna, Lycoming, Sullivan and Wyoming counties, Pennsylvania.
“Northeast Pennsylvania is definitely one of the sweet spots of the Marcellus Shale,” said James Lardner, Geoscience Manager – Northern District, Eastern Division. “The Marcellus lies about 7,000 feet below the surface and runs about 280 feet thick here.”
“The latest wells in Susquehanna County, Pennsylvania, are very good,” noted Jim Govenlock, District Manager – Northern District, Eastern Division. “The Clapper 2H has been on line 167 days, producing over 12 mmcf/d on 70 of those days with peak production at 17 million. The wells in this area are great –even better performers than those in the Barnett Shale.”
Nomac rig 38 punctuates a wintry landscape in
Bradford County, Pennsylvania.
Not only are the Pennsylvania wells top performers, so are the teams who have undertaken the tasks of drilling and producing them. “We’ll have come from four rigs in March 2009 to 19 by spring 2010,” Govenlock said. “I think this may be one of the most aggressive ramp-ups in the history of the industry.”
Wise decisions are critical. “We’re in the beginning stages here,” explained Gary Gould, Manager, Reservoir Engineering. “We’re still experimenting at targeting our laterals within the Marcellus Shale formation, which varies from 50 to 280 feet in depth. One depth is certainly better than another here. We are also experimenting with completion techniques.”
In some areas of eastern Bradford and western Susquehanna counties, a limestone formation bisects the upper and lower portions of the Marcellus Shale. This feature, called the Cherry Valley member, cuts the Marcellus in half horizontally and can present a fracturing and reservoir barrier.
“In any shale play, if you figure out early in the game how and where to drill, you can multiply the impact of the decision thousands of times,” Gould said. “A $100,000 profit improvement in one well may not seem huge when you consider the enormous sums of money involved in drilling and producing natural gas. But when you multiply that by the 10,000 wells in a huge play like the Marcellus, you are talking about a billion dollars.”
Leasehold acquisitions are critical. Serena Branch, Land Manager – Northern District, Eastern Division, has led her land team through many challenges in the region. “We spend a lot of time educating landowners, helping them calculate the opportunities they gain by leasing with Chesapeake versus our competitors. This area doesn’t have an established history of natural gas exploration and production, so there is a lack of knowledge about the process and people are very concerned about it, particularly hydraulic fracturing.”
A long way from Fort Worth, James Mills,
Pipeline Technician, transferred to the
Marcellus Shale to share the expertise
he gained in the Barnett Shale in North
The land group also deals with the region’s “non-Jeffersonian” metes and bounds land system, which results in legal descriptions of properties being bounded in ways quite different from the familiar systems of the Mid-Continent region. “Leasing is very complicated here,” Branch said. “The land descriptions and leasing forms are complicated and the legal aspects are significant. But our Wyoming County leasing program went very well, and we’re working with landowners who are forming parcels to strengthen negotiations."
According to Govenlock, the greatest challenge of developing the Marcellus Shale of northeastern Pennsylvania is the regulatory environment. “Drilling regulations are very stringent here,” Govenlock said. “Many of our people operating here are used to different rules because they have come from other areas of the country. We’re learning. And we are learning well.
“Chesapeake’s environmental and safety standards adhere strictly to all local, state and federal rules. And we insist that the standards of our contractors do too. We are firm about that. We recently had a training meeting for contractors and expected 600 people to attend – we had 800.”
How does an industry operate effectively in an area where it has a negative perception?
“We have to convince people that we are the most responsible company – a best friend and a good corporate neighbor,” Govenlock said. “We have to follow through on our commitments. If we say we’re going to do something, we do it."
Development of massive shale plays requires many decisions: which land to acquire, adherence to regulations, where to drill, how to complete and how to transport the gas to sales.
Its ability to coordinate development makes Chesapeake unique, according to Lardner. “We are learning what each of our groups brings to the table,” he claimed. “I’ve never worked so closely, so often, with Reservoir, Land, Operations and Regulatory departments. That not only makes Chesapeake a better company, it makes us better employees.”
The team extends far beyond the Appalachian Basin, all the way to the company’s proprietary core lab located on its Oklahoma City headquarters campus.
Building an infrastructure for the future, the
Mowery 2 pipeline is under construction.
“Much of our strategy will involve confirming and drilling pilot and core wells to learn more about the rocks than our competitors have,” said Lardner. “We are using our Reservoir Technology Center in Oklahoma City for all our core analysis. This is a great advantage from a time and quality perspective. Our information and analysis turnaround is a matter of weeks instead of months – or years.”
Each member of the company’s development team constantly refers to teamwork and opportunity when they discuss the Marcellus Shale.
“Chesapeake won the land rush,” said Gould, “and that gave us great opportunities in all the shale plays. My job is to help make the most of those great opportunities.”