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CHARLESTON, W.Va. -- Federal government analysts on Monday slashed their estimate of the natural gas reserves in the Marcellus Shale formation, and at least one major producer announced plans to cut in half its expenditures on new gas leases in the wake of dropping prices.The U.S. Department of Energy cut its estimate of the Marcellus reserves from 410 trillion cubic feet of natural gas to 141 trillion cubic feet, citing better production information that emerges as drilling operations in the region mature and the exclusion of data from the pre-shale area."Drilling in the Marcellus accelerated rapidly in 2010 and 2011, so that there is far more information available today than a year ago," said the DOE's Energy Information Administration.Last summer, a new estimate from the U.S. Geological Survey had caused a stir, because it was both much smaller than the existing EIA numbers and much greater than the previous USGS figures.The previous USGS figure was about 2 trillion cubic feet, but it was nearly a decade old. New research and more advanced drilling methods led that agency to increase its estimates in a report issued in August 2011.The EIA number of 141 trillion cubic feet released Monday is within the range -- 43 trillion cubic feet to 144 trillion cubic feet -- of those newer figures published by the USGS. But it is significantly greater than the average USGS figure of 84 trillion cubic feet.By comparison, the U.S. consumes about 24.1 trillion cubic feet of natural gas per year.In Monday's preview of its Annual Energy Outlook, due out in April, EIA increased its estimates of cumulative natural gas production between 2010 and 2035 by 7 percent.
Total domestics natural gas production is expected to increase by about 1 percent annually over that same time period.But the share of that gas coming from drilling in shale formations like the Marcellus is projected to more than double, from 23 percent in 2010 to 49 percent in 2035, according to EIA.EIA cited technological advances in drilling, but also said that operators are likely to focus on drilling for shale gas in areas where the gas is accompanied by high concentrations of natural gas liquids, such as ethane, butane and propane. These natural gas liquids can provide companies with additional income.In West Virginia, most of the Marcellus reserves are "wet gas," that includes these other materials. West Virginia political and business leaders are hoping this makes the state a likely location for a "cracker" plant that would process natural gas liquids and spur chemical industry growth. State leaders are increasingly focused on the Marcellus boom, hoping growth there would offset a coming projected decline in coal production in Southern West Virginia.On Monday, Chesapeake Energy announced it would respond to "the lowest natural gas prices in the past 10 years" by cutting production and reducing the number of active drilling rigs in "dry gas" areas, including parts of the Marcellus Shale in northeastern Pennsylvania.Chesapeake also said it would cut expenditures on new gas leases from $3.4 billion in 2011 to about $1.4 billion this year, and focus that spending on "liquid-rich plays.""An exceptionally mild winter to date has pressured U.S. natural gas prices to levels below our prior expectations and below levels that are economically attractive for developing dry gas plays in the U.S., shale or otherwise," said Chesapeake CEO Aubrey McClendon. "We have committed to cut our dry gas drilling to bare minimum levels that are likely to be maintained until expected drilling economics on dry gas plays return to levels competitive with expected returns in Chesapeake's lineup of liquids-rich plays, which we believe is the best in the industry."
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