Leading independent gas and oil company, Noble Energy Inc, has today announced that it has set up a joint venture agreement with CONSOL Energy Inc, in order to investigate undeveloped Marcellus Shale properties in Pennsylvania and West Virginia.

The partnership will cost Noble in the region of $3.4 billion, comprised of $2.13 billion of drilling and completion expenditure, and $1.07 billion in land. A further $219 million will be spent on a 50% share of an existing CONSOL site on the Marcellus Shale, which is one of the biggest fields of natural gas ever identified.

CONSOL has indicated that in 2010, its Marcellus Shale properties contained 400 billion cfe of proven reserves, although it is likely that the site in its entirety contains nearer 7.4 trillion cfe. By entering into an agreement with CONSOL, Noble is anticipating 2015 daily production values of nearly 600 million cfe, increasing as the investigation continues and further rigs are added.

Development and drilling activities are expected to last for over ten years and is likely to see the digging of 4,400 wells. As part of the agreement, Noble's drilling expenditure has been capped $400 million each year, with a suspension if gas prices fall below a $4 threshold per MMBtu (million British thermal unit).

Mining the area is not without its obstacles however; the US Department of Energy has raised environmental concerns over the hydraulic fracturing methods used to extract the gas, and has recently requested further explanation of the process.

Noble Energy's CEO, Charles D. Davidson, stated: "Noble Energy is excited about the opportunity to establish a position in the Marcellus Shale, which is considered to be one of the most economically attractive developments in North America due to its enormous resource potential, its proximity and access to premium markets, and its competitive cost structure. This transaction will complement and further strengthen our U.S. portfolio by adding a high-quality asset with a substantial growth profile. The Marcellus, combined with our ongoing developments in the DJ basin and deepwater Gulf of Mexico, will provide important balance to our rapidly expanding international programs. Spreading the transaction costs over an extended time horizon creates better partner alignment on investment decisions and maintains our strong balance sheet."

CONSOL CEO, J. Brett Harvey, added: "We are extremely pleased to have Noble Energy as our partner in the Marcellus. Noble Energy is a world-class operator that shares CONSOL's dedication to safety and compliance and they bring a strong technical and operational expertise to this partnership. This agreement will benefit the regional economy, the communities in which we operate, our employees, and our respective companies. Together we will be able to accelerate the development of this significant resource safely, efficiently and economically."

Author: Lee Marriott, Analyst