Chesapeake is spending $2.2 billion for 800,000 acres of leases in the rich Utica Shale that runs underneath Ohio. There are now eight rigs running and will have 20 poking holes in the ground by November of this year. Ohio now has approximately 275,000 wells drilled and is ranked 4th in the nation.
Sulmona Energy is uniquely positioned to negotiate, on behalf of landowners, to maximize the highest per acre lease price with energy processing companies like Chesapeake.
Ohio Shale Plays
Ohio has seen a renewed interest in oil and natural gas activity, largely in part due to two Ohio shale plays – the Marcellus Shale and the Utica Shale. Before explaining these plays, it is important to understand the technology that has made these plays viable.
Vertical Well Spacing Compared to Horizontal
Horizontal (or sometimes called Directional) drilling has made several shale plays economically possible. Horizontal drilling is the process of drilling a well vertically from the surface to a subsurface location just above the target oil or natural gas reservoir (commonly called the “kickoff point”). This process is similar to the drilling process for a traditional vertical oil or gas well.The difference is that a horizontal well deviates or turns the well bore horizontally to intersect the oil and natural gas reservoir at a specific entry point.
The end result is a better pathway for oil and natural gas is created to reach the well bore. . In a very basic sense, a horizontal lateral is like a drainage ditch a farmer might use to drain water from their fields.
Horizontal drilling has two key benefits. First, the flow of oil and natural gas into the well bore is dramatically increased. In a traditional vertical well, approximately 50 feet of the wellbore is open to capture oil and natural gas. A horizontal lateral can go a mile or farther into the reservoir rock formation, exposing more oil and natural gas reserves to the well bore.
Additionally, horizontal drilling has led to reducing the overall footprint of oil and natural gas activity. As the example in the following graphic shows, this horizontal well produces the energy of 32 oil or natural gas wells. Prior to horizontal drilling technology, you would have had to drill 32 wells in the area to get the same energy production as 1 horizontal well.
Marcellus Shale and Ohio
The Marcellus Shale has transformed the Appalachian natural gas market and the state of Pennsylvania. The Marcellus Shale lies under approximately 60% of Pennsylvania. Eastern Ohio is located on the western edge of the Marcellus Shale play.
At this time, the Marcellus Shale play in Ohio does not appear to be economically viable. The thicker the formation, the better chance a producer has at recovering economic quantities of oil or natural gas. At its deepest point in Ohio, the Marcellus Shale is 62 feet thick (which is generally not thick enough for recoverable quantities of oil or natural gas).
The Utica/Point Pleasant Shale and Ohio
The Utica Shale, however, is a different story. The Utica Shale extends across most of Ohio and ranges in thickness from 87 feet to 350 feet. The play also appears to have several thick pockets of recoverable oil and natural gas trapped in the reservoir rocks.
Additionally, it is believed that the Utica Shale play in Ohio will be a “liquids” play. This means that the Ohio Utica Shale is believed to hold more crude oil and wet gas. How much? A recent report by the state’s geologist, Larry Wickstrom, released some astounding estimates on the Utica Shale. If we are to assume that the Utica Shale play in Ohio holds one-third of its volume in natural gas and two-thirds of its volume in crude oil, recovering just 1.2% of these hydrocarbons would result in 3.75 trillion cubic feet of natural gas and 1.31 billion barrels of oil. If we increase the recoverable rate up to 5%, the estimated recovery jumps to 15.7 trillion cubic feet of natural gas and 5.5 billion barrels of oil. Ohio would have the ability to become a major oil producing state if this recoverable estimate were to hold true.
However, there is also excitement surrounding the recoverable “wet gas” from the Utica. From wet natural gas, we get ethane, which is then used to create ethylene. Ethylene is commonly used in several consumer products including toys, diapers, household items, siding, window frame, pips, medical tubing, medical gloves, tires, hoses, and other various consumer products. If the Utica Shale play in Ohio were to hold a source of ethane, it is likely that the chemical industry (and the associated economic activity) would come back to Ohio and the Appalachian Basin due to a large local source of this natural gas byproduct.
A recent study done by the National Association of Manufacturers (NAM) supports this claim. In their December, 2011 study, NAM states that shale gas production in the United States benefits the nation’s economy by providing lower energy and feedstock costs and driving the demand for certain chemical, industrial and mechanical products. The report’s executive summary states that U.S. manufacturing “could employ one million more workers by 2025 due to affordable energy (shale gas) and demand for products used to extract the gas”.