Marcellus Output Not Slowing Down

The Marcellus Shale will continue to be the country's biggest driver in the growth of natural gas production, according to a new report from Morningstar. The report, "Shale Shock," concludes that despite years of phenomenal shale gas production, the Marcellus Shale is not slowing down. "The emergence of the Marcellus Shale-the vast gas-bearing rock formation in the northeastern United States-is a game-changer for the U.S. energy industry," Mark Hanson, Morningstar's strategist for energy equity research, said.

The Marcellus has been at the heart of the shale gas "revolution." Far from fizzling out, Marcellus output continues to climb. Production increased by 61% in 2013 from the year earlier. And by the end of next year, the Marcellus will account for nearly one-quarter of U.S. natural gas production, up from 20% currently. The region will be churning out 14 to 20 billion cubic feet per day in 2015.

Related Article: How to Profit From a Rise in Natural Gas Prices

While shale plays are often characterized by rapid initial decline rates, the gas industry in the Marcellus has been able to stem the tide through greater efficiency. Companies have been able to boost production on a per rig basis, and have also moved to 24-hour operations. At current production rates, the Marcellus could last between 30 and 75 years, according to the report.

Still, shale plays do decline quickly, and drillers will have to drill 1,000 new wells each year just to keep production flat. Morningstar projects the industry will be able to achieve that rate of drilling, with an expectation of 1,600 new wells drilled each year going forward.

The report estimates that total natural gas production in the United States will increase 2% this year and next. Also, prices could find a longer-term equilibrium between $5 and $6 per thousand cubic feet.

By Charles Kennedy of Oilprice.com