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.
"the biggest thing to happen in the state economically since the plow"
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.
"Even if gas prices are depressed, the Utica play could be an economic play" McClendon said.
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."
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Most Popular Articles
From the Career Center
Jobs that may interest you