Friday, May 4, 2012

Marcellus Shale Update

In April, Williams Partners L.P. announced it has agreed to acquire Caiman Energy's wholly owned subsidiary, Caiman Eastern Midstream LLC, for approximately $2.5 billion. The acquisition will provide Williams Partners with a significant footprint and growth potential in the natural gas liquids-rich portion of the Marcellus Shale.

What is the Marcellus Shale?
The Marcellus Shale is a geological formation that was formed by the accumulation of sediment into a sea. This formation was eventually buried over many thousands of years and compressed to produce an organic-rich black shale.  The Marcellus starts at the base of the Catskills in upstate New York, stretches across the upstate toward Marcellus, New York (the town from which the formation is named) and southwest to West Virginia, Kentucky, and Ohio. The Marcellus Shale is known to be deeper on the southeast edge of the formation that borders the ridge and valley regions of New York, Pennsylvania, Maryland, and West Virginia. The Marcellus gets more shallow as it heads Northwest towards Ohio and Lake Erie.

Why Now?
The success of the Barnett Shale played in North Central Texas has allowed companies to transfer the hydrofracturing technology to other areas, such as the Fayetteville Shale play (Arkansas), Haynesville Shale play (Louisiana and Eastern Texas), and the Marcellus Shale play. Additionally, the population centers of Northeastern U.S. are very close in proximity to the Marcellus Shale. This improves the economic conditions of the play because the demand for natural gas from this region is high; there are also costs associated with the transportation of natural gas so the close proximity will result in lower transportation costs.

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