Chevron now pursues Marcellus Shale gas
Thursday, November 11th, 2010
Another member of big oil will be investing in Pennsylvania's natural gas resource known as the Marcellus Shale. Chevron corporation announced this week an agreement to buy the independent, Pennsylvania-based Atlas Energy.
The $3.2 billion-dollar deal illustrates a reversal in how large energy corporations view natural gas extraction.
Before smaller companies like Atlas began tapping the Marcellus Shale a few years ago, larger energy companies like Chevron had given up on natural gas. But new technology known as hydraulic fracturing has made investment in natural gas extraction worthwhile. At the same time, the price of natural gas has dropped significantly, making it prime time for big oil to step back in and buy up smaller companies.
Bob Gillon is an independent energy analyst with IHS Herold Inc.
He said Wednesday there's a big shift going on in the gas industry.
"It went from one of declining production and high prices to one of rising production and surplus supply and low prices," said Gillon. "It's been absolutely amazing to watch happen."
Gillon said engineers with his firm have estimated the amount of natural gas that lies a mile beneath the forests and farmlands of Pennsylvania, New York, Ohio and West Virginia is large enough to provide the country's gas needs for 10 to 12 years.
He said companies like Chevron are thinking about profits over the long term.
"Chevron's optimistic that energy prices over time will rise as demand increases," said Lloyd Avram, a Chevron spokesman. "We've got a growing world, we got an economy that relies heavily on energy. We believe that natural gas will be an important part of the energy mix long term as we move to use cleaner forms of energy that are less carbon intensive.
"So, long term, we look at the Marcellus Shale opportunity and believe it's got tremendous potential."
The deal would give Chevron access to more than 450,000 acres of land in the Marcellus region. An estimated 9 trillion cubic feet of natural gas lies beneath those acres.
But the natural gas rush has generated opposition from environmentalists and residents who say the process contaminates water supplies. And recent efforts to enact a tax on drillers in order to fund environmental remediation failed to get through the Pennsylvania Legislature.
Iris Bloom is with Protecting Our Waters — which opposes drilling.
"It shows that these corporations are making tons of money, so the claim that they're an infant industry is just completely bankrupt we've known that for a long time," she said.
Bloom wants a moratorium on drilling until studies on public health effects are completed.