Utica: The New Shale and its Increasing Demand

Edward Camp, II
ShaleNavigator Team Lead at Geospatial Corporation

Until recently, the Utica Shale formation has been overshadowed by the Marcellus Shale formation. The Utica lies underneath the Marcellus in Pennsylvania, Ohio, West Virginia and New York, but in 2012, its potential was finally recognized.

The Utica gas revolution is so new to us that it was only added to the Energy Information Agency’s Monthly Drilling Report August 2014. Yet, the source rock is almost 100 million years older than the Marcellus Shale and much deeper by about 3,000 to 7,000 feet. The greater depth means higher drilling costs, but according to Oilprice.com, the hydrocarbons are estimated to be more pressurized, resulting in even better production than Marcellus shale.

Former Chesapeake Energy CEO Aubrey McClendon called it ‘the biggest thing to hit Ohio since maybe the plow.’ And, since 2012, Utica shale production has increased from 155 million cubic feet per day to 1.3 billion cubic feet per day. Production per rig has increasingly improved as well.

Chesapeake was one of the first companies to take on the Utica shale, followed by Shell, Consol and Chevron.

Compared to the Marcellus Shale, Utica shale remains more difficult to drill. Drilling costs have been reported to cost between $15 million and $22 million per well, which is three times the drilling cost of Marcellus.

As of December 2014, Utica gas tapping has been targeted in western Pennsylvania and southeast Ohio. Southeast Ohio is currently the fastest-growing natural gas production area in the country.

Proof of Utica’s potential is Shell’s Gee well, which has been in production for a little over a year. Their initial flowback rate was reported at 11.2 million cubic feet of natural gas per day. And, the Neal well , observed peak flowback rates of 26.5 million cubic feet per day. This data proves these two high-pressure wells contain excellent reservoir quality.

Hydraulic fracturing completion and horizontal drilling technology is increasingly advancing the production of Utica shale. However, recently, several exploration and production companies reported ‘financial belt-tightening’ due to lower oil and gas prices. Yet, the same companies reported that most drilling programs would continue and energy payrolls would stay consistent.

On the leasing end, areas like the Ohio Valley have felt the impact of Utica shale production. For instance, Weirton, West Virginia’s Brooke-Hancock Business Development Corporation identified about a dozen sites in two counties to match with business prospects. The corporation says they believe these jobs and employers in the manufacturing industry will continue to decrease the unemployment in the area.

Utilities companies see a promising future in Utica shale production. For example, utility companies like Duke Energy Corp. and Dominion Resources Inc. announced plans in September for a $5 billion natural gas pipeline to transport oil and gas from the formation.

And, Utica shale’s impact could potentially expand globally. With the Federal Energy Regulatory Commission’s recent approval of the Cove Point LNG plant, experts say Japan or India could be producing electricity from Utica gas by the end of 2024.

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