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Utica Could Transform Ohio Rust Belt into Diamond Belt
Rig Zone ^ | September 23, 2011 | Karen Boman

Posted on 09/26/2011 7:01:48 AM PDT by thackney

Chesapeake Energy and other oil and gas companies are setting their sights on the untapped potential of eastern Ohio's Utica shale play, which could significantly bolster the state's economy through the creation of oil and gas jobs, said industry officials on Wednesday at the 21st Century Energy & Economic Summit at Ohio State University in Columbus.

Ohio was home to some of the nation's earliest oil and gas activity, with over 8.5 Tcf of gas and 1.14 billion barrels of oil produced since 1860. Until recently, oil and gas exploration and production has been primarily focused on sandstone and limestone formations such as the Clinton. However, technological breakthroughs that have unlocked shale potential in other states could make development of Ohio's Utica shale possible, reversing the recent trend of declining oil production in the state.

The Ohio Department of Natural Resources' Division of Geological Survey estimates the recoverable reserve potential of the Utica/Point Pleasant shale play in Ohio at between 1.96 billion to 8.2 billion BOE. The Utica shale play extends across Pennyslvania, New York and other U.S. states as well as Canada.

Besides Chesapeake Energy, a number of energy companies have been acquiring leases in this potential play, including Anadarko Petroleum, Devon Corp. and Hess Corp. An ExxonMobil spokesperson Thursday confirmed media reports that the company was acquiring leases in Ohio's Utica shale.

Exxon Mobil Confirms Utica Shale Activity News of Exxon Mobil's venture in Ohio's Utica Shale surfaced in The Wheeling News-Register on Sept. 17 that scores of leases have been signed for $4,950 per acre and 19% on production royalties.

Exxon Mobil spokesman Jeff Neu confirmed Thursday in a Dow Jones report the company is "active" in the Utica Shale but declined to comment on the price it's paying per acre or for production royalties.

Neu's confirmation marks the first venture by world's largest public oil company into the field, which is thought to hold vast amounts of crude oil. In 2010, Exxon Mobil acquired a large presence after it purchased natural gas company XTO Energy in the neighboring Marcellus Shale in Pennsylvania.

Chesapeake Announces Major Utica Discovery In late July, Oklahoma City-based Chesapeake Energy reported making a major new discovery of a liquids rich shale play in eastern Ohio. While the ultimate size of the Utica shale play in Ohio remains uncertain, Chesapeake CEO Aubrey McClendon said he thinks the company's success drilling other shale plays will enable it to develop the Utica shale.

The Utica shale drilling boom could be "the biggest thing to happen in the state economically since the plow" and could transform Ohio's rust belt into a diamond belt, McClendon told summit attendees.

The company has invested just under $2 billion over the past two years to buy 1.25 million acres of Ohio Utica shale assets, and plans to drill about 12,500 wells on that land. Multiply that by what other companies have acquired and it could mean a capital investment of $200 billion over the next 20 years, McClendon noted.

"The play reminded us of the Eagle Ford shale, which is distinctive because it is a three phase play of dry gas, wet gas and liquids," said McClendon.

The company has based its conclusions on proprietary testing of 3,200 core samples from nine wells and analysis of data from 2,000 well logs. Approximately 80 percent of Chesapeake's leasehold is focused on wet gas and oil phases.

McClendon noted that the building blocks of industrial businesses, ethane, propane and butane, are present in the Eagle Ford shale.

The presence of ethane, propane and butane could potentially attract petrochemical industries to Ohio. The oily portion of the Utica play could potentially supply Ohio's refineries, said EnerVest Ltd. President and CEO John Walker.

"We hope to drown the Marathon refineries in Ohio [with Utica oil],"Walker said.

Chesapeake will have a significant corporate presence in Ohio, with field offices throughout the state and a large regional headquarters in the state.

"We'll be among the top 10 oil and gas companies in Ohio, investing $300 million a day every day for the next 20 years," said McClendon.

The company will hire college graduates from the state, but "we need all kinds of labor, from PhDs to college dropouts," McClendon said.

As of Sept. 19, 37 horizontal permits had been issued for Utica shale wells in Ohio, with nine horizontal wells drilled to date, according to the Ohio Department of Natural Resources. While Marcellus shale drilling activity also is taking place in Ohio, the state is experiencing far less Marcellus activity drilling compared to other states as the Marcellus shale is much thinner on its western edge.

Job Potential Beyond Oil and Gas The anticipated Utica shale drilling boom also is creating job opportunities within the steel industry, as steel is used in well construction; the industry is also a substantial consumer of energy resources. Steel remains an important industry in Ohio, and the anticipated boom in Utica shale drilling has led to commitments from steel companies in Ohio to expand facilities for manufacturing oil and gas equipment.

"The state has lost manufacturing capacity, but we still have a tremendous amount of capacity" said Karen Wright, CEO of Ariel Corporation, a manufacturer of natural gas compressors. The company, which anticipates a tremendous amount of business related to Utica shale activity, has partnered with a technical college in Ohio in order to grow its workforce.

The Utica shale drilling boom could also change the distribution of energy in the Midwestern U.S., with the potential of oil exports from Ohio to surrounding states, said Gary R. Heminger, president and CEO Marathon Petroleum Corporation.

"The potential goes beyond exploration and production to refining, distribution, retail and all the jobs surrounding that end," Heminger said.

Significant Economic Impact Seen From Utica Development According to a recent study, more than 204,000 jobs will be created or supported by 2015 due to exploration, leasing, drilling and connector pipeline construction for the Utica shale reserve. The study, released on Sept. 20 by the Ohio Oil & Gas Energy Education Program, estimates that, with the substantial pace of development, economic output from Utica development will increase by more than $22 billion, and wages will increase by $12 billion by 2015.

In the year 2015, local government wage tax revenues will amount to $240 million due to the economic impact of Utica shale development. This estimate excludes the severance or ad valorem taxes levied upon producers of crude oil and natural gas, according to the study, which was conducted by Kleinhenz & Associates.

Ohio Governor Sees Energy as Economic Development Tool The energy summit this week in Columbus is part of the governor's plan for shaping a comprehensive state energy policy.

"The goal of the summit is to receive critical information from a broad base of organizations, including cola mining operators and the Natural Resources Defense Council, for input on a broad range of topics, including workforce development, utilities, transportation, energy efficiency, that policymakers can use going forward," said David Mustine, general manager of energy for JobsOhio, an initiative proposed by the governor to encourage economic development through job creation.

Workforce development will be critical to development the Utica shale, Mustine said, noting that his organization would be working with state agencies and the industry to make sure the right technical training is being implemented to meet industry needs.

Mustine noted that Ohio has tremendous assets in terms of education, which can be used as a platform for job training, including an extensive network of universities, community colleges and technical schools. The state is home to Marietta College, which offers a degree program in petroleum engineering, Mustine said.

State Prepared for Shale Drilling Boom with Updated Laws Ohio's regulations now include some of the most advanced oil and gas laws following an update of the state's oil and gas permitting and drilling regulations last year, Mustine said.

"We've had hydraulic fracturing in Ohio for decades, and are very familiar with the process," Mustine said.

The update, which was passed by the state's legislature as Senate Bill 165, updated some regulations covering hydraulic fracturing, including the requirement of disclosure of chemicals.

"We're very confident we have the right regulatory plan in place and appropriate oversight for hydraulic fracturing," Mustine said.

The governor and state legislators have been supported of the industry efforts, but insist that the job be done right, said EnerVest's Walker.

"If you frack a well and make a mistake, the state severely punishes you, and if you do it several times, you lose your license to drill," said Enervest CEO Walker. "And we're fully supportive of that. We think there should be tough regulations on fracking."


TOPICS: News/Current Events; US: Ohio; US: Pennsylvania; US: West Virginia
KEYWORDS: energy; naturalgas; oil; shalegas

1 posted on 09/26/2011 7:01:51 AM PDT by thackney
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To: thackney

And the Obama EPA magically ceases to exist?


2 posted on 09/26/2011 7:05:44 AM PDT by VanDeKoik (1 million in stimulus dollars paid for this tagline!)
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To: thackney

we need a new president.


3 posted on 09/26/2011 7:07:46 AM PDT by ken21 (ruling class dem + rino progressives -- destroying america for 150 years.)
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To: thackney

I live in the heart of the Marcellus Shale. We are drilling like crazy and creating new pipelines to carry the gas to major markets as well as new power plants that will feed directly from the wells.

The latest whine from the environmentalists is that while we are seeing lots of economic activity now, it will be over in 20-30 years creating ghost-towns throughout Pennsylvania.

However, the Marcellus is producing far higher yields than expected. The Utica may yield oil as well as gas.

Drilling is here for 100 years.....and the environmentalists are caught lying -— AGAIN.


4 posted on 09/26/2011 7:09:29 AM PDT by Erik Latranyi
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To: VanDeKoik

Yes. On January 20th, 2013.


5 posted on 09/26/2011 7:12:41 AM PDT by thackney (life is fragile, handle with prayer)
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To: Erik Latranyi
The Utica has shown to have natural gas, natural gas liquids and oil. The quantities will take some time and exploration to get reliable numbers.
6 posted on 09/26/2011 7:15:09 AM PDT by thackney (life is fragile, handle with prayer)
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7 posted on 09/26/2011 7:20:59 AM PDT by thackney (life is fragile, handle with prayer)
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To: Erik Latranyi

“The Utica may yield oil as well as gas”

Yes, it is called Quaker State.


8 posted on 09/26/2011 7:25:17 AM PDT by woodbutcher1963
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To: thackney

Thack,

Thanks again for a great article.

What is the current price per barrel that this technology needs to remain cost effective for extraction?


9 posted on 09/26/2011 7:26:11 AM PDT by headstamp 2 (Time to move forward not to the center.)
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To: woodbutcher1963

“The Utica may yield oil as well as gas”

Yes, it is called Quaker State.”

Cue the Quaker Guy.


10 posted on 09/26/2011 7:27:19 AM PDT by headstamp 2 (Time to move forward not to the center.)
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To: thackney

Any effort toward energy independence be it natural gas fracking, oil sands or shale exploitation or the opening up of ANWR, will be strenuously objected to by the left in an attempt to keep us vulnerable to the whims of the enemy states like the islamic world and clowns like Hugo Chavez. The left wants a weak USA that has to bargain with megalomaniacs for our survival.


11 posted on 09/26/2011 7:28:20 AM PDT by muir_redwoods (Somewhere in Kenya, a village is missing an idiot)
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To: muir_redwoods
If the development is on private lands, and that state decides to support the effort rather than try to block it, great strides can be made.


12 posted on 09/26/2011 7:31:25 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

I still haven’t seen Chesapeake release any reserve numbers or well economics. They claim that the Utica is better than the Eagle Ford but their wells in the play are such dogs, it wouldn’t take much. Also, if their position is so good, why are they already adveristing that they will develop it with a joint venture? You don’t allow others to share in the good stuff. More hype from the schisters in OKC.


13 posted on 09/26/2011 7:35:49 AM PDT by crusty old prospector
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To: headstamp 2
What is the current price per barrel that this technology needs to remain cost effective for extraction?

I do not believe there is enough wells with flow test data to provide a good answer to that question, at least not yet.

Keep in mind the Utica contains Natural Gas and Natural Gas Liquids as well as oils and the quantities are still very preliminary.

However, this article from a very good source stated that prices could be depressed and still be economical.

14 posted on 09/26/2011 7:37:45 AM PDT by thackney (life is fragile, handle with prayer)
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To: headstamp 2

Arnold Palmer has been putting it in his tractor for 100 years.


15 posted on 09/26/2011 7:38:51 AM PDT by woodbutcher1963
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To: crusty old prospector
I still haven’t seen Chesapeake release any reserve numbers or well economics.

I expect any number from Chesapeake will be preceeded by the words "up to", rather than "at least".

16 posted on 09/26/2011 7:39:40 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney
However, this article from a very good source stated that prices could be depressed and still be economical.

Also, over the next 30 years as the Saudi oil reserves start to become depleted, and natural gas starts replacing oil in some usages, the price of natural as will go up, making economical some areas that might currently be marginal.

17 posted on 09/26/2011 8:12:54 AM PDT by PapaBear3625 (When you've only heard lies your entire life, the truth sounds insane.)
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To: thackney

I think gas prices are currently edging down because opec and democrat party allies see the possiblity of a republican/tea party sweep, and they are trying to stop it.

Republicans would tap our resources and would have gas below 2 dollars within a year.


18 posted on 09/26/2011 8:55:53 AM PDT by FreeAtlanta (Fight for Liberty)
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To: FreeAtlanta

I don’t see the democrats doing anything to lower the price of oil, even on a short term basis.


19 posted on 09/26/2011 9:03:31 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney
This website has a decent summary of the Utica Shale. I would say that the oil play would extend to the -8000’ contour at the most. Deeper than that, it is more than likely a gas play. Looks like the oily play will be in eastern Ohio and southern New York. At depths below -12,000’ in Pennsylvania, it is probably over mature.

http://geology.com/articles/utica-shale/

20 posted on 09/26/2011 9:03:44 AM PDT by crusty old prospector
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To: Erik Latranyi
The latest whine from the environmentalists is that while we are seeing lots of economic activity now, it will be over in 20-30 years creating ghost-towns throughout Pennsylvania.

Twenty to 30 years? That's one generation at least that would live well. Ghost towns? We have 'em all over the West. When the gold mines gave out, people moved on and created wealth somewhere else. Some places became wealth producers in other areas of production and prospered.

The enviros protests, as usual, are ludicrous.

21 posted on 09/26/2011 9:19:29 AM PDT by Oatka ("A society of sheep must in time beget a government of wolves." –Bertrand de Jouvenel)
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To: crusty old prospector

That would be similar to what has been found in the Eagle Ford Shale.

http://www.eia.gov/oil_gas/rpd/shaleusa9.pdf


22 posted on 09/26/2011 9:30:10 AM PDT by thackney (life is fragile, handle with prayer)
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To: Erik Latranyi
The latest whine from the environmentalists is that while we are seeing lots of economic activity now, it will be over in 20-30 years creating ghost-towns throughout Pennsylvania.

Well, the West is littered with ghost mining towns. The part of Ohio I grew up in has several not-quite-ghost former steel towns (when I go back "home" for high school reunions, I nearly cry at what has happened to where I grew up).

So, we may end up with some gas and oil ghost towns a few decades hence. Is that worse than not having oil and gas during those decades?

23 posted on 09/26/2011 10:41:47 AM PDT by JoeFromSidney (New book: RESISTANCE TO TYRANNY. A primer on armed revolt. Available form Amazon.)
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To: thackney

Well, by supressing business and the economy, the democrats are reducing demand.


24 posted on 09/26/2011 10:58:51 AM PDT by Alas Babylon!
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To: Erik Latranyi
Drill baby Drill !

Economic benefits aside, it makes heads explode amongst the watermelon morons  

25 posted on 09/26/2011 3:35:14 PM PDT by tomkat (para bellum)
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To: headstamp 2
I found another piece of information to tell you how little is known about this formation.

But according to Wachovia Securities analysts, only 16 wells for production have been drilled into the Utica so far. That's a small number in a geologic formation that covers some 170,000 square miles.

http://online.wsj.com/article/SB10001424052970204010604576592783750697202.html?mod=googlenews_wsj

26 posted on 09/27/2011 10:38:23 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Thanks!


27 posted on 09/27/2011 5:08:24 PM PDT by headstamp 2 (Time to move forward not to the center.)
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To: thackney

Thank God there are now some Republicans in charge in my state of birth! I suspect under the previous Dem regime they would be passing laws at a furious rate to prevent this.


28 posted on 09/27/2011 5:13:55 PM PDT by nascarnation
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To: crusty old prospector
I was close. Rather than “up to”, it was “as much as”.

Chesapeake Energy Corp. produced as much as 1,425 barrels a day of oil and petroleum liquids at one of its first four wells in Ohio’s Utica Shale

http://fuelfix.com/blog/2011/09/28/chesapeake-reports-production-from-first-utica-shale-wells/

29 posted on 09/28/2011 12:56:08 PM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Yeah, I wonder what Day #2 and #3 were like. I know enough about the geology of the Northeast to be dangerous. From what I remember of the Utica, it is the equivalent to the Sylvan Shale of the Mid-Continent and Permian Basin. In those areas, it is thin and not much of a source rock. If if does work as they advertise, their stock should double in the next few months.


30 posted on 09/28/2011 6:24:57 PM PDT by crusty old prospector
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To: crusty old prospector
The Utica Shale is thicker than the Marcellus.


31 posted on 09/29/2011 4:54:49 AM PDT by thackney (life is fragile, handle with prayer)
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