Shale Gas Trends in Ohio: Abandoning Marcellus, Embracing Utica

Ohio is on the western edge of two enormous black shale formations in Appalachian Basin: the 390 million year old Devonian Period Marcellus Shale and the Utica Shale, formed from deposits in the Ordovician Period about 460 million years ago.

Image source: Ohio Environmental Protection Agency

The Ohio Department of Natural Resources (ODNR) has made it easy to find shale gas data from these two formations.
This is provided that you are only interested in horizontal wells. ODNR sums up their opinion of the importance of horizontal wells thusly:

Effective immediately, the vertical permits (stratigraphic test well permits) have been removed from this listing. In the initial phases of both Marcellus and Utica exploration, they were listed to reflect exploratory activity. They are no longer necessary with the increase of horizontal permitting activity. As always, they are available through the Oil and Gas On-line Well Search (1).

To me, this seems like an arbitrary line in the sand for the ODNR to take, but then again, each state has its own quirks with dissemination of their oil and gas data. In Pennsylvania, for example, there is no way to determine a well’s source formation without a file review, other than whether or not the well is drilled into the Marcellus.  And in New York, the entire debate is couched around the phrase “High Volume Horizontal Hydraulic Fracturing”, a specificity unmatched elsewhere in the basin, that includes well stimulations using more than 80,000 gallons of fluid.  In many respects, the ways in which the states release their data are datapoints unto themselves, but then, that is the subject of a different post altogether.

So let’s take a look at the trends in Ohio for the deep shale gas formations:


Ohio shale gas permits, including Marcellus (blue) and Utica (red). Please note that Marcellus wells include horizontal and vertical permits, while Utica includes only permits for horizontal wells. Please click the gray compass rose and double carat (^) to hide those menus.


Horizontal Marcellus Shale permits issued in Ohio through 4-9-2012

Clearly, there is not nearly as much activity as there is in Pennsylvania or even West Virginia. Altogether, there have been 13 horizontal Marcellus permits issued in the Buckeye State, the most recent of which was nearly ten months ago.  Seven of the permitted locations have been drilled so far.

Here’s the data from the Utica Shale:


Horizontal Utica Shale permits issued in Ohio through 4-9-2012

Altogether, there have been permits issued for 194 horizontal Utica wells, 60 of which have been drilled so far. Moreover, it seems to be in a period of rapid expansion; a distribution is reminiscent of the Marcellus in Pennsylvania in 2006 to 2007 (see link above).

Only nine of the sixty drilled wells were in production in 2011, four of which produced some oil from early completion and flowback phases, but no natural gas as of yet. None of the horizontal Utica wells were in production for the entire year in 2011.

Here are the statewide totals from the horizontal Utica wells:


Statewide production values from horizontal Utica Shale wells in Ohio in 2011

It is worth noting that over 59 percent of the gas production came from one well publicized Harrison County gas well–its 1.5 billion cubic feet of production is reported to be the source of 2 percent of the entire state’s gas production.

While that is an impressive quantity of gas from one well, it might be the oil production that is raising eyebrows in the industry. As this post is being written, oil prices are at $104 per barrel, and natural gas is trading at $1.92 per thousand cubic feet (Mcf). While there really isn’t much data to go on to determine if the results are typical, if there continues to be oil associated with the Utica gas to that extent, we may see more drilling rigs focused on the older formation, and fewer on the Marcellus.

  1. The well database is here. There are some limitations on the utility of this database, however, as users cannot use formation as a search parameter, and searches are limited to 1,000 records. Upon request though, the ODNR did send me a DVD full of data. The information is available, it just takes some fortitude to slog through it.
Trail Logbook Project

Collaborative Trail Logbook – Reporting Gas Industry Impacts on PA Trail Experiences

(Harrisburg) – FracTracker.org and the Keystone Trails Association are proud to launch Trail Logbook: Reporting Gas Industry Impacts on Pennsylvania Trail Experiences – an effort to collect information from hikers and other trail users who have had negative or hazardous encounters while recreating in PA.

“Throughout the Marcellus Shale region, more and more we’re hearing of problems from our constituents,” said Curt Ashenfelter, Executive Director of the Keystone Trails Association (KTA) – a volunteer-directed, public service organization dedicated to providing, preserving, protecting and promoting recreational hiking trails and hiking opportunities in PA. “Pennsylvania hikers are concerned about the effect of drilling and want to play a role in monitoring the impact of this industry on PA’s forests and hiking trails.

With a simple-to-use form – available online and as a mail-in postcard – data on a variety of trail impacts related to shale gas drilling activities will be uploaded to FracTracker.org, a website providing a common portal to share data, photos, maps, and information related to the issues corollary to the shale gas industry. Photos of reported impacts can also be submitted.

“We’re pleased to be a partner in this grassroots endeavor to aggregate what have to date been mostly anecdotal but often alarming reports from our state’s extraordinary network of trails,” said Brook Lenker, Director of FracTracker. “We hope the information gathered helps to clarify the nature of the impacts and leads to sustainable solutions.”

“With over 3,000 miles of hiking trails in Pennsylvania and tourism being the Commonwealth’s 2nd largest industry, it’s critical to expose and address recurring problems caused by gas drilling activities, “ Ashenfelter added. “With a quick feedback loop like FracTracker, we can report problems to the appropriate agencies and gas drilling companies and seek remediation quickly.”

For more information on the Trail Logbook project, contact:

To  see the Trail Logbook submission page or to submit data, visit: https://www.fractracker.org/logbook. If you would prefer to print out the logbook and mail it in, click here.

###

Drilling and Compliance in PA’s Marcellus Over Time

The following line chart shows the number of Marcellus Shale wells drilled in Pennsylvania from January 2007 through March 2012, and the number of violations issued (1) by PADEP over the same period of time:


Drilled Wells and Violations in PA’s Marcellus Over Time

While drilling activities in Pennsylvania’s Marcellus Shale really got under way in 2005, the threshold of 10 wells drilled in a month didn’t happen until 2007, so the earlier data has been omitted in favor of charts that are a little less crowded. Here are a few milestones that have happened along the way:

  • First month with more violations than wells: April 2008 (difference=8)
  • First month with 50 violations: June 2008 (n=82)
  • First month with 50 wells: June 2009 (n=75)
  • First month with 100 violations: July 2009 (n=101)
  • First month with 100 wells: November 2009 (n=111)
  • First month with 100 more wells than violations: September 2010 (n=109)
  • First month with 200 wells: August 2011 (n=212)
  • Longest streak with more wells than violations: 15 months (January 2007 to March 2008) (2)
  • Longest streak with more violations than wells: 7 months: (February to August 2009)
  • Second longest streak with more wells than violations: 11 months (May 2011 to March 2012)
  • Second longest streak with more violations than wells: 2 months (Aug.-Sept 2008 and Dec. 2009-Jan 2010)
  1. Included in violations is the total number of records from the compliance report linked above during the given time period where the “Marcellus only” and “Inspections with violations only” fields are set to “Yes”. This inflates the number of incidents reported by PADEP, which keeps track through the number of unique violation ID’s issued, so that if two instances are issued the same violation ID, it will be counted as one violation.
  2. This streak may well be longer if months prior to 2007 were included

What are the Effects of Falling Gas Prices on PA’s Marcellus Shale?

In July 2011, the wellhead price of gas was $4.27 per thousand cubic feet (Mcf). As of this morning that price had fallen to $2.09, a decrease of more than 51 percent in well less than a year. This trend is widely projected to continue as gas reserves approach storage capacity in the US, at a time of year in which suppliers are typically busy recouping the pipelines after peak wintertime consumption. There is plenty of speculation that the price could fall to $1 per Mcf, or maybe even lower, sometime this summer.

In Pennsylvania’s Marcellus Shale, however, drilling operators are still hard at work, having applied for 742 permits and drilled 383 wells in the first quarter of 2012.

For consumers, this is of course all very good news. On the other hand, energy companies, lease holders, and counties signing up for the new impact fee are losing money with the low price of gas.

To be sure, there are still plenty of leaseholders taking home plenty of dollars:


Reported Gas production from Marcellus wells: July to December 2011. Please click the compass rose and double carat (^) to hide those menus.

The map above was designed to show wells that would make less than $1,000 (blue); $1,000 to $10,000 (orange); and $10,000 and above (purple) in leaseholder royalties over a six month period, assuming a wellhead price of $2.00 and 12.5 percent royalty (1). At these conditions, of the 2,257 Marcellus wells reporting production for the last half of 2011, 1,651 would have yielded royalty checks over $10,000, and 104 wells would have yielded less than $1,000.

Can Non-Productive Wells Be Avoided?

While there is widespread disagreement about many issues surrounding the Marcellus Shale in Pennsylvania, it is in nobody’s best interest to drill and stimulate wells that are not going to be productive. The question is, can drilling of relatively unproductive wells be avoided? These data don’t provide a difinitive answer to that, but do show how variable production returns can be, even on a local scale:


Production from Marcellus wells in southwestern Pennsylvania from July to December 2011, by municipality and well.

This map shows communities where very large amounts of gas are produced (dark red) adjacent to those where no gas is produced at all. And even within those dark red municipalities, there is considerable variability between the wells themselves. In Cumberland Township, Greene County, for example, there are two adjacent wells that each produced more than 600,000 Mcf in the reporting period, but less than a third of a mile to the north is another Marcellus well that produced only 7,383 Mcf (2).

For all the analysis that doubtlessly goes into placing the wells, the gas yields seem highly variable, even at very short distances.

  1. Just to be clear, the production numbers from these wells were from late 2011, when the wellhead price of gas was well above $2.00. The purpose of this map is to give a general idea of what royalties on $2.00 gas would look like in Pennsylvania’s Marcellus.
  2. I’m not going to claim that this result is typical without doing any spatial analysis, but it can be considered as anecdotal evidence of variability, in conjunction with the distributions visible on the map above.