Energy Execs Still Hopeful About Utica's Northern Tier
YOUNGSTOWN, Ohio -- Top executives in the oil and gas industry say while the southern tier of eastern Ohio's Utica shale appears to be the most lucrative and drawing the most attention from producers, it doesn't mean the northern portion of the play – Mahoning and Trumbull counties, for example -- won't develop over time.
"We have three wells off two pads in Mahoning County," said Harry Schurr, general manager of Consol Energy and Hess Corp.'s Utica joint venture. "We are still planning to put those into pipeline and flowing them into market."
As these wells produce, more information about the northern region will be made available and therefore offer a better snapshot of the Utica's northern potential, Schurr said. "We're going to understand what those wells can really bring to the table, and if we find that they're economic and looking good for revenue generation, then we have acreage positions in these areas," he said.
Initial production results from Consol Energy's Mah2 well in Ellsworth, for example, "fit with what we were expecting in that area. The question is what's the longevity of those reserves."
The Ellsworth well produced hydrocarbons, liquids and natural gas, and the company is expecting to tie the well into a production pipeline, he said. "So, that's a good indication that we're not walking away. We want to see what they'll do."
Should production at the Mahoning County wells hold up, this part of the Utica could warrant future investment by Consol, Schurr said. "We do have more acreage there, and if we see that it supports that, then of course we would be looking a future opportunities."
Schurr was among a host of speakers at the Youngstown/Warren Regional Chamber's third Youngstown Ohio Utica and Natural Gas, or YOUNG, conference and expo held Thursday at the Covelli Centre.
The conference speakers touched upon issues such as midstream infrastructure, economic development, technology and supply, the development of CNG fueling stations, and the prospects of the Utica play.
Clearly, Schurr said the so-called "sweet spot" of the Utica play is forming in Belmont. Noble, Guernsey, Harrison and Monroe counties in the southeastern part of the state, where well results from other producers have proven extremely strong.
"It's always going to be this constant balance," he added. "Is it better to spend our money in Noble, Jefferson, Harrison, Belmont or Guernsey, or is it better to spend it in Portage or Mahoning? It comes down to rate of return and what you can generate out of those areas."
Tom Stewart, executive vice president of the Ohio Oil and Gas Association, said producers are getting a better understanding of how the play is developing. "Every well that is drilled gives them valuable information -- even bad wells," he said.
Stewart said the trend thus far has pointed south, extending from Columbiana County in the north to Noble County in the south. "We have high hopes that the northern end of the play will work, but there's only one way to find out, and that's to drill wells."
At least three different producers – Halcon Energy, BP America and Hilcorp Energy -- are actively drilling wells in the north, especially in Trumbull and Mahoning counties. Stewart noted that this stands as evidence that interest in this part of the play has not faded. "They're very much focused on this area of the play, particularly in the Mahoning Valley."
Critical to oil and gas production is an effective midstream network. In Mahoning County, Pennant Midstream -- a partnership between NiSource and Hilcorp -- is developing its $300 million Hickory Bend project, which includes a $150 million processing center in Springfield Township in Mahoning County.
The Springfield plant takes natural gas and separates the liquids from dry gas. The dry gas is pumped through traditional gas lines while the liquids are transported via pipeline to a fractionation complex, where they are divided into specific base products used to make ethane, propane or butane.
Another partnership between Dominion and Caiman Energy II, called Blue Racer Midstream, is contemplating building another processor similar in size in nearby Petersburg in Mahoning County, said Brent Breon, vice president of business development at Blue Racer.
"We have an option on property on the Petersburg location, and we're working very quickly to get final commitments to construct the Petersburg complex," he told the audience at YOUNG.
"Everything is moving its way north as the Utica develops," Breon said. "As the producers continue to develop their techniques, there will be a natural progression."
The proposed Petersburg complex would tie into existing infrastructure developed by Dominion during the 1950s and 1960s to serve industrial demand in northeast Ohio. So there wouldn't be the need for an aggressive build out, he said.
Nevertheless, the Petersburg project largely depends on the amount of business the midstream provider can secure with producers in the northern tier, Breon noted. Liquid gas from wells as far south as Harrsion and Carroll counties could be pushed to the Petersburg plant for processing, he added.
"In order for us to be able to hit the numbers we want to see on the piepeline system, I think Petersburg eventually comes into play."
All of this activity contributes to significant job growth across the entire state, said David Mustine, managing director for Energy, Chemicals and Polymers at JobsOhio.
Since shale exploration activity began in earnest two years ago, more than $6.5 billion has been invested or proposed for midstream projects alone, Mustine said. Other support jobs are more difficult to quantify, he noted, but pointed to obvious projects related to oil and gas development such as Vallourec Star's new $1 billion pipe mill in Youngstown, Six C Fabrication in Portage County, and Spectrum Energy Services offices in Jefferson County.
These developments have created "thousands of jobs" throughout Ohio, Mustine said, including construction and full-time positions in the energy sector.
"We're still trying to figure out just how many indirect jobs," have been created since the oil and gas industry accelerated exploration in Ohio, he added.
The next phase of development, Mustine emphasized, is to work with companies looking to lower their energy costs and attract them to Ohio, especially those in the petrochemicals industry.
"Ohio has the advantage of having a pro-business environment," he said.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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