University of Pittsburgh's Institute for Entrepreneurial Excellence and Katz Graduate School of Business release Supply Chain Study for a Marcellus Shale Well

Posted August 30, 2011

Pittsburgh – The results of a University of Pittsburgh study into the direct economic impact of operating a single Marcellus Shale well are scheduled to be released on Tuesday at the 2011 Energy Forum at the Hilton Garden Inn Southpointe.
“This study fills a critical information gap on the impact of gas drilling and extraction from Marcellus Shale deposits deep underground. Our goal is to provide a realistic picture of the direct costs of natural gas drilling,” said Shaun M. Seydor, director of Pitt’s PantherlabWorks program at the Institute for Entrepreneurial Excellence.
The Pitt team worked with the energy company, EQT, to study an operational Marcellus Shale drilling site in Washington County. Undergraduate and graduate business students visited the well in March, and then conducted subsequent research to quantify the value chain for the well’s life cycle.
A key finding of the study was that a single well had direct costs of more than $7.6 million. The central costs were site preparation and reclamation – which accounted for nearly 40 percent of total cost – and mobilization of equipment and materials, which included drilling rigs, hydraulic fracking equipment, power generation, and steel and steel derivatives.
The study was a joint project between the University of Pittsburgh’s Institute for Entrepreneurial Excellence and Katz Graduate School of Business. Although the study maintains a purely academic perspective, its authors hope it will provide insight and valuable information to stakeholders, industry, landowners, government, educators, and both proponents and opponents of Marcellus Shale drilling.
“This project attempted to simplify and quantify a very complex, ambiguous, and ever-changing process,” said Bill Hefley, clinical associate professor of business administration.
The study – called the “Economic Impact of the Value Chain of a Marcellus Shale Well – reviewed the direct effects of the supply chain. The project was broken into eight phases and comparisons between a vertically and horizontally integrated supply chains were made.
“By understanding the costs of production, we can look to identify entrepreneurial opportunities in our region,” Seydor said.
The analysis was based on field research and interviews with industry participants.
The project was supported by the Dean’s Office of the Katz Graduate School of Business, the Institute for Entrepreneurial Excellence, and Washington County Energy Partners.
The study will be publicly available on the Katz and Institute for Entrepreneurial Excellence website on Tuesday August 30th, 2011 at