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Shale Drillers Getting Better Grip on Utica's Potential
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PITTSBURGH -- After three years, oil and gas companies exploring Ohio's Utica shale are getting a better grasp on how the play is unfolding, and are devising more efficient methods to profitably extract dry gas and natural gas liquids from the rock.
And, executives say, there is the potential of tapping into the volatile oil window of the play in a section to the west in Tuscarawas, Stark and portions of Portage counties.
"We believe it could be the next surprise as we move forward in this play," said John Walker, president and CEO of EnerVest Ltd., a Houston company that now holds the largest acreage position in the play with 1.2 million gross acres. "It's an area that's being overlooked."
Walker made his comments during Hart Energy Inc.'s DUG East Conference Thursday at the David L. Lawrence Convention Center, an event attended by oil and gas executives, vendors, Pa. Gov. Tom Corbett and the 43rd president of the United States, George W. Bush.
Bush appeared during the luncheon at the event, which was attended by more than 2,000 representatives of the oil and gas industry. He purposely avoided controversy, instead confining the question-and-answer format to observations on his own time in office. Regarding the oil and gas industry, his only comment concerned the proposed Keystone XL pipeline, which he called a "no-brainer."
Corbett reiterated that 200,000 jobs have been created in Pennsylvania as a result of exploration of the Marcellus Shale, and called critics of the industry and that job-creation estimate "economic change deniers."
Executives who spoke at the event all agreed that the Marcellus and Utica shale plays hold tremendous potential for the companies and the regional economy.
Said EnerVest's Walker, "It's wonderful to see this transformation. We're hoping for success everywhere."
The volatile oil EnerVest is exploring in the Utica refers to hydrocarbons that are in a gaseous or near-gaseous stage when trapped in a reservoir. As they are brought up to the surface, changes in temperature alter the state of these hydrocarbons and produce liquids.
"It's valuable because the price of oil is much higher than the price of natural gas and natural gas liquids," he said. However, it's much more difficult to extract oil molecules from shale than dry gas or NGLs.
Walker said his company has two test wells in the volatile window, and he believes that the rock and pressure is sufficient there to allow production. "The volatile oil window has a tremendous amount of oil in place, about 16 million barrels per section," he reported. "We just haven't scientifically figured how to get it out yet. Our industry is a very high-tech industry and we will learn how to do that."
The EnerVest CEO said he's confident the volatile oil window code could be cracked within two years. "I'm optimistic. I think that if we had to say what part of the Utica has the most upside potential, it might be the volatile oil window."
But that's probably not the case with the "black" oil deposits that border the volatile oil window, Walker said. "It's thermally immature."
Still, as technology improves, so does the potential of tapping black oil, Walker said, reminding the audience that 10 years ago, engineers thought it impossible to extract natural gas and natural gas liquids from shale.
Other companies are experimenting with longer horizontal laterals on their wells and using shorter hydraulic fracturing stages with impressive results.
"We have learned a lot," Jim Palm, president and CEO of Oklahoma City-based Gulfport Energy, told the Hart Energy conference. "We're encouraged by the early results we see."
Palm cautioned that the Utica play is still in its infancy, especially relative to production.
Gulfport has concentrated its acreage position in the southern tier of the Utica -- especially in Belmont and Harrison counties, Palm said. Wells now in production in this part of the play have turned in strong results because of geological "overpressure" found in the formations there. The rock in this part of the play lacks the faults that are more evident in the northern portion, he added.
Thus, the southern tier of the Utica is yielding more profitable "wet" gas products such as ethane, butane and propane.
"We like that playground," Palm said. "It sure has turned out nice where we are. We've been lucky to an extent and I'll take luck anytime in the oil business."
Gulfport holds 157,000 gross acres in the Utica, and has drilled some of the longest laterals for horizontal wells. The company plans to devote $615 million of its $700 million capital expenditures next year to developing the Utica shale.
A good portion of that money -- between $225 million and $275 million -- would be devoted to further land acquisition in 2014, Palm said.
Gulfport has placed into commission some of the strongest wells in the Utica. "There's no place that we've drilled a well that we wouldn't go back and drill another well," he said of the Utica.
Executives are also optimistic on dry gas production in Pennsylvania's Marcellus shale, despite depressed prices in the market.
Consol Energy Inc., Pittsburgh, recently divested itself of five coal mines in West Virginia and is redirecting the proceeds of that sale to financing its shale exploration.
Consol has made efficiency gains in three different areas, said Nick Deluliis, president of Consol. The rate of drilling has decreased substantially over the last number of years, he said, while the design of wells and drilling methods have also helped to lower production and exploration costs.
The third is the opportunities for "stacked" plays, that is, the ability to drilling into other shale formations near Pennsylvania's Marcellus, such as the Upper Devonian.
"You do see synergies after synergies with Marcellus opportunities on a well pad," Deluliis said.
"You take all three of those things, they translate into better unit costs, better cash flows, better EUR [estimated ultimate recovery], better reserves and finding better development costs," he said.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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