Monday, October 10, 2011

Utica Shale May Be Its Own Energy Game-Changer

When it comes to superlative descriptions of oil and gas reserves, the Utica Shale may be in a class of its own.

The rock layer that extends from Quebec to Kentucky with major concentrations in Ohio, Pennsylvania and West Virginia has been called the next big play for shale gas; attracted billions of dollars in land investment, and been hailed by Chesapeake Energy chief Aubrey McClendon as "one of the biggest discoveries in US history."

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It may contain even more energy potential than the Marcellus Shale -- a formation that lies above the Utica over some of the latter's range -- whose vast reserves of natural gas have themselves been called a "game-changer" for American energy independence.

According to an estimate from Ohio state geologists, that state's portion of the Utica alone could contain up to 15 trillion cubic feet of natural gas, which would make it a significant contributor to national supplies of the fuel that will help cut greenhouse gas emissions and create thousands of jobs.

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But the Utica is distinguished by also harboring natural gas liquids and large quantities of oil which have sparked a rush by energy companies to acquire leases on millions of acres of land, especially in eastern Ohio.

The Ohio geologists calculate there could be as many as 5.5 billion barrels of recoverable oil underlying their state's share of the Utica, or about a third of the expected production from Alaska's Prudhoe Bay, the largest US oil reserve.

The Utica's riches have already generated investment from at least half a dozen oil and gas companies including Chesapeake Energy, the world's leading shale-gas producer, which has leased 1.25 million acres across the play, more than any competitor.

Widespread Impacts

"This is huge from the standpoint of energy independence," said Mike Arthur, a Pennsylvania State University geoscientist and co-director of the college's Marcellus Shale Center for Outreach and Research.

"It could even obviate the need for a pipeline from the tar sands," he said in reference to a proposed pipeline from Canada to Texas that has sparked opposition from environmentalists.

The Utica's potential would be endorsed if, as expected, Chesapeake forms a joint venture to develop the play, said Chris Perry, manager of the Energy Resources Group at the Ohio Geological Survey, and a co-author of the state's Utica study.

"It would be an independent appraisal of what Chesapeake is claiming they have," Perry said.

In late September, Chesapeake released results from four of its first 12 Utica wells in eastern Ohio and western Pennsylvania. The wells achieved "strong initial production success," producing between 3.1 million and 9.5 million cubic feet a day, the company said.

That suggests that the Utica is living up to its promise, said Perry.

"We know from Chesapeake's initial production numbers that the eastern part of the state looks pretty darn good," he said.

A Lucky Accident

He also cited a vertical well drilled in Ohio's Belmont County by another company that wanted only to dispose of brine but, hitting the Utica formation, found itself producing 1.5 million cubic feet of gas a day from the well even without stimulation and without the benefit of the horizontal drilling technology that has been a crucial facilitator of the shale-gas boom.

Other companies investing in Ohio's Utica play include XTO Energy, Chevron, Anadarko and Shell, said Tom Stewart, executive vice president of the Ohio Oil & Gas Association.

"What that shows is that very large, well-capitalized producers have all seen the potential of making a major investment on this basis," Stewart said. "These are cold, hard business people making rational decisions."

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