The last barrel
Drake’s discovery, which is often referred to as the first commercial U.S. oil well, was drilled specifically to extract “large” quantities of higher-quality petroleum than was being mined from surface seeps along the banks of Oil Creek, south of Titusville. Before the Drake discovery, most oil producers were drilled principally for salt brine; hydrocarbons were considered a nuisance byproduct.
Explosive growth. A century-and-a -half after Drake’s discovery, the Appalachian basin is booming once again. The expansion of U.S. natural gas production can be attributed largely to the Marcellus and Utica shale plays. In 2007, Appalachia was the world’s 32nd-largest natural gas producing region. Today it’s in third place, trailing only the full U.S. and Russia, says Tim Gould, head of energy supply outlook at Deloitte. “The speed and magnitude of Appalachia’s emergence onto the global natural gas scene is unprecedented, and due mainly to the Marcellus and Utica shale plays, which reside mostly within Pennsylvania, West Virginia and Ohio.”
Sustained increases/ample supply. Far from plateauing, U.S. natural gas production is projected to break domestic records in 2018, and again in 2019, according to EIA. And with supply remaining strong, reports say natural gas prices nationally are expected to remain relatively steady in upcoming months. Natural gas from the Marcellus and Utica shale reserves accounted for approximately 30% of total U.S. natural gas production in December 2017, and the area is expected to contribute 37% of the national output by 2040 (EIA). Greg Kozera, director of Shale Crescent USA said, “by 2040, the area is projected to produce almost as much natural gas as the entire U.S. did in 2005, prior to the shale revolution.”
New petrochemical hub? While consumers will benefit in coming years, the affordability of natural gas may also be advantageous to manufacturers. With gas expected to remain the most-consumed fuel in the U.S. industrial sector, areas accessible to ample reserves are gaining ground as prime locations to build plants, says Kozera. The exceptional growth in the Marcellus and Utica plays has made the northeastern U.S. an extremely desirable location for petrochemical plants, according to a new IHS Markit report. “Because of the availability of natural gas and natural gas liquids, the region is positioned to surpass the Gulf Coast as the most profitable place to build petrochemical plants.” Kozera followed-up by saying, “because of lower feedstock costs, cash costs are 23% lower than on the Gulf Coast. Additionally, IHS reported “delivery costs are 23% lower, since supply is closer to end-users. The region’s close proximity to two prolific shale plays has created one of the world’s largest supplies of natural gas, and subsequently led to the lowest fuel prices in the developed world.”
Switch to cleaner power generation. Although the U.S. has always had an abundance of natural gas (at least from an operator’s perspective), electricity providers continued to build coal-fired plants, fearing supply shortages, in spite of significant pressure from green activists and the international community. However, with the Marcellus giant flexing its muscles, this trend is beginning to change. Just a decade ago, coal provided roughly 50% of the fuel used to generate the U.S.’s electric power while natural gas accounted for less than 20%, according to U.S. News and World Report.
The advent of the shale plays (mostly the Marcellus) has reassured power-generating companies that new gas-fired builds will not be subjected to low-supply or escalating feedstock prices. Combined, these factors have caused the percentage of electricity generated from natural gas in the U.S. to reach an all-time high of approximately 34% in 2016, exceeding coal’s contribution (30.4 %) for the first time ever.
U.S. LNG exports surge. After six decades of importing large amounts of natural gas, the U.S. became an exporter of the fuel in 2017, due to record production from shale fields. In 2017, the U.S. exported 1.94 Bcfd, up from 0.5 Bcfd in 2016 (EIA). Dominion Energy’s newly constructed Cove Point LNG export terminal on Chesapeake Bay (Maryland), shipped its first commercial cargo in April, bringing the total number of U.S. LNG exporters to two. The company said the facility is now poised to deliver product under long-term contracts after more than three years of construction and a cost of $4 billion (Bloomberg). This massive investment speaks volumes about the sustainability of natural gas production in the region, and the quality and areal extent of the Marcellus/Utica reservoirs.
Cove Point is the second-largest U.S. LNG export terminal after Cheniere Energy’s Sabine Pass in Louisiana. Combined, these two plants have an export capacity 3.6 Bcfd and are accelerating the U.S.’s emergence as an LNG superpower that should challenge Australia and Qatar for market share in the next five years.
The prize. Recent development in the Appalachian basin has driven gas production in the region to surpass that of entire continents. Additionally, U.S. gas production is expected to double by 2040, with much of the growth coming from the Appalachian basin, says Tim Gould, Deloitte. “The opportunity is so great that the region will undoubtedly benefit, whether it makes an effort to do so or not. If, however, Appalachia collectively decides to realize more of the value inherent in its shale gas and develops a coordinated plan to do so, the economic implications are staggering.”
So, 159 years after the initial Titusville discovery, the region’s enormous potential is once again being tapped and exploited. I think Colonel Drake would approve. 
