ODNR issues nine Guernsey-based drilling permits

SALEM – The Ohio Department of Natural Resources issued nine horizontal drilling permits the week ending Aug. 9, all in Guernsey County.

There are 48 drilling rigs operating in the Utica/Point Pleasant shale play. To date 1,431 horizontal and permits have been issued and 1,004 wells drilled with 495 of those producing oil and gas products. Of the nine permits, Eclipse Resource had five, American Energy Utica three and Chesapeake Exploration had one.

The first horizontal drilling permit in Ohio was issued in 2010.

Activity in the northernmost part of the Utica shale area is driven by midstream pipeline being laid to individual wellsite to connect to with main lines to production facilities.

On Monday, a federal report said that natural gas production in Ohio’s Utica Shale region is growing rapidly, noting that in eastern Ohio it increased by more than 10 times over the last two years.

It jumped from 115 million cubic feet per day in 2012 to an estimated 1.3 billion cubic feet per day by September 2014.

The Utica play is one of the fastest growing natural gas production areas in the United States, according to the U.S. Energy Information Administration.

The report said Utica oil production has also increased to about 40,000 barrels per day but the numbers remain smaller than leading regions such as the Marcellus in Pennsylvania, the Bakken in North Dakota, or the Eagle Ford in Texas.

Another development, reported by the Associated Press, Royal Dutch Shell agreed to sell drilling rights in shale formations in Louisiana and Wyoming for $2.1 billion in two transactions.

In one of the deals, Shell will also receive drilling rights to land in Ohio and Pennsylvania.

Shell is working to focus its onshore U.S. drilling program on a few of the more prolific formations in an effort to boost profitability.

Shell will sell its Pinedale acreage in Wyoming to Ultra Petroleum for $925 million and 155,000 acres in the Utica and Marcellus shale formations in Ohio and Pennsylvania.

It will sell its Haynesville acreage in Louisiana to Vine Oil & Gas and the investment firm Blackstone for $1.2 billion.

Major oil and gas explorers regularly sell rights to fields where production is flat or declining and use that cash to fund exploration programs designed to discover new or more prolific fields that oil giants need to fuel growth.

The Marcellus shale in Pennsylvania has proven to be an extraordinarily prolific dry gas producer, and profitable for drillers because it produces gas at high rates per well.

Ohio’s Utica shale is also proving to be prolific, and it includes a higher proportion of more profitable liquid hydrocarbons.

Last month, the ODNR said combined unconventional and conventional natural gas production in Ohio nearly doubled, from 86 Bcf in 2012 to 171 Bcf last year (see Shale Daily, July 2).

The increase was driven mainly by high-volume horizontal fracturing (fracking) from 352 Utica and Marcellus Shale wells, which accounted for 100 Bcf of the 2013 total.

During a second quarter earnings call, transcribed on the Seeking Alpha website, Rice Energy’s CEO Daniel Rice IV talked about the Utica play, noting, “Now what we originally hypothesized for planting our flag in Belmont County and have recently validated with the Big Foot well is that the porosity in the Point Pleasant is the primary driver of production in the Utica shale.

“The porosity we are seeing in Belmont remains pretty constant heading into Central Greene County, Pa. and the biggest difference between these two areas is it gets considerably deeper as we move east.

“So we are expecting the Utica to be at approximately 12,000 feet deep in western Greene County but what we know about the production potential in Belmont County from our Bigfoot 9H, there is a lot of recoverable gas in the southern part of the Utica play.

“So we like the Utica potential over here and we are going to drill our first Utica Pennsylvania well in the first half of 2015 on this recently acquired Western Greene acreage.”

Regarding its midstream commitment, Rice said, “I mean going in we had an expectation that the Utica was going to be really good and when we started to design the system, we learned the hard way, super, super early on in the company that, if you under size your pipe it’s a whole lot more expensive to go back in and little bit or expanded. So when we designed the system, I mean if you the entire system we have will have 3.5, 4.5 Bcf a day of capacity between Pennsylvania and Ohio.

“So, we’re making sure that we’re over sizing the system in the event that this stuff is a lot better than we expected it to be. And so long story short, we have oversized the pipe in Belmont County to accommodate our production.”