Tayvis Dunnahoe
Special Projects*
Ohio—once the largest oil producer in the US at the turn of the 20th century—may soon advance its rank closer to this status through 2015. In May, Ohio's Department of Natural Resources (DNR) released production numbers for 2012, which accounted for 636,000 bbl of oil and 12.8 bcf of gas. As of June, the state has produced 413,000 bbl of oil, bringing its ranking to 18th in the US for oil production.
Ohio's current oil output is derived mainly from stripper wells in the eastern part of the state; however, this is expected to change through 2015. While the play is still being developed, the state predicts that Utica shale oil will provide 73% of its total output in the next 2 years.
During 2012, horizontal shale wells accounted for less than 1% of the 51,000 oil and gas wells in Ohio. According to a study released by the Institute for Energy Research (IER), shale wells supplied 12% of the state's total oil production and 16% of its gas output.
The Appalachian basin, which crosses eastern Ohio, contains both the Marcellus and Utica formations. Although, the Marcellus shale thins out on its western edge, which results in fewer Marcellus wells being drilled in Ohio than in Pennsylvania and West Virginia.
The state's gas reserves were estimated at 758 bcf in 2011, or 0.2% of total US gas reserves, according to IER. Ohio's gas production has declined 58% since its peak in 1984 when it had a marketed production of 186,480 Mcf, says the US Energy Information Administration. The state currently supplements its gas production from western Canada and the Gulf Coast, but this may soon change as drilling continues.
Operators drilled 215 shale wells in 2012 in Ohio, of which 87 are now producing oil and gas, according to data from DNR. Based on current production results and the continuing upward trend of new drilling permits issued, the state predicts that unconventional resources will produce 82% of Ohio's gas by 2015, IER said.
Infrastructure, access
The development of pipelines and processing facilities remain the major challenges for increased production in Ohio. The state has the second-highest refining capacity in the US Midwest. Its four refineries process 528,000 b/d of oil. With much of the feedstock supplied from the Gulf Coast, Ohio could start processing more Utica oil as production rises.
In 2009, the 1,679-mile Rockies Express Pipeline (REP) was completed and began delivering gas from the Rocky Mountains eastward into Ohio. In July, REP announced a precedent agreement with a large Utica shale producer to transport up to 200,000 decatherms/day of processed Utica production to markets in the Midcontinent. Competition between the rise in Marcellus and Utica production from the Rockies is leading to a reversal of REP, which was largest to be constructed in 20 years in the US. The decision is currently under review by the US Federal Energy Regulatory Commission and has not yet been determined.
Liquids-rich play
The Utica contains an abundance of natural gas liquids. Much of the newer infrastructure under way in Ohio will serve the increased NGL production. On Sept. 30, Pennant Midstream LLC reported the construction of a $60 million, 12-in., 38-mile NGL pipeline that will connect the Hickory Bend Cryogenic processing plant in New Middleton, Ohio, to the UEO Kensington facility near Kensington in Columbiana County. The line will have a delivery capacity of 90,000 b/d. It is jointly owned by Harvest Pipeline, and affiliate of Hilcorp Energy Co., and NiSource Midstream Services.
The addition of this pipeline is critical to unlocking the potential of Ohio's Utica shale, the company said, as it will enhance the Pennant gathering and processing facility, offering access to wet gas processing as well as residue gas and NGL takeaway to attractive market destinations. The pipeline is under construction and is slated for completion by July 2014.
In May, MarkWest Utica EMG LLC, a joint venture of MarkWest Energy Partners LP and Energy & Minerals Group, began the expansion of its large-scale midstream system to support the rapidly growing drilling programs of Antero Resources, Gulfport Energy Corp., and other producers in the southern core of the Utica shale. The firm said it would construct a third 200-MMcfd cryogenic gas processing facility at its Seneca processing complex in Noble County. When completed, the facility will process 600 MMcfd total.
The company also is developing the Cadiz complex in Harrison County, which is anchored by Gulfport. In May, the company began operating the 125-MMcfd Cadiz I plant, which was the first major cryogenic processing facility in eastern Ohio. The capacity at Cadiz will increase to 325 MMcfd by mid-2014 with the completion of Cadiz II. In the last year, MarkWest Utica EMG has executed agreements with seven producers developing acreage in the southern core of the Utica shale. By 2014, the company's midstream system in the Utica shale will consist of more than 300 miles of gathering pipeline, five processing facilities totaling almost 1 bcfd, and 10,000 b/d of C2+ fractionation capacity.
Ohio also will see many other smaller projects develop through 2015. Pinto Energy LLC reported it will develop the Ashtabula gas-to-liquids project. The 2,800-b/d plant will be installed at the firm's 80-acre industrial site east of Ashtabula and will convert gas from Utica and Marcellus shale into specialty products. The plant may be the first commercial small-scale GTL plant in North America and will use Velocys PLC's F-T technology. Mechanical completion of the plant is expected in late-2015 and start-up in early 2016.
The wide range of projects slated for eastern Ohio in the next several years bode well for increasing Utica production. While many of these also will serve Marcellus production from Pennsylvania and West Virginia, Ohio will continue to see increased unconventional resource development.
"The Utica hasn't developed as quickly as the industry had hoped. The big question is if the resource is viable," said Dan Simmons, IER director of regulatory and state affairs.
*Tayvis Dunnohoe is editor of OGJ's Unconventional Oil & Gas Report.
