Drilling Down

Utica Conference Offers Reasons for Optimism

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By Jackie Stewart, EnergyInDepth.org

CANTON, Ohio – The Canton Regional Chamber hosted a Utica Upstream conference at the Pro Football Hall of Fame this week with speakers that included regulators, industry executives, analysts and academics.

Each speaker discussed the unique regional demand for shale that exists within a 500-mile radius of Ohio, West Virginia and Pennsylvania. That fact, coupled with the staggering production of Utica and Marcellus oil and natural gas wells, has the region poised for ongoing success. Steve Irwin with the Ohio Department of Natural Resources summed it up best when he said, “In 2015 we produced more gas [in Utica] than we consumed in 2015, and this is a great thing … certainly for home heating, electric generation and various uses of natural gas. The rig count may be down, but we are seeing sustained or increasing production; we have surpassed J.D. Rockefeller.”

ODNR’s Irwin also highlighted the recent U.S. Environmental Protection Agency audit that gave Ohio’s Underground Injection Control program high marks and praised the state for its mitigation of induced seismicity.

“Has the seismic monitoring caused ODNR to curtail some drilling?” an audience member asked.

“We have curtailed some operations in northeast Ohio,” Irwin responded. “But from a broad perspective we have not because the seismic monitors are not picking up any activity. We will continue our commitment to protecting the environment and increasing our inspections.”

In addition to the seismic discussion, the increased need for more staff was a topic of conversation, as ODNR has sole and exclusive authority to regulate the oil and natural gas industry in Ohio.

Iryna Lendel of Cleveland State University’s Center for Economic Development and Energy Policy Center was another presenter who spoke on the current state of the industry. “I like to say we are in a pause,” she said. “The pause is very favorable for Utica, in particular. Our takeaway infrastructure is just catching up.”

Lendel, who has led research efforts in the Appalachian Basin for the past several years, highlighted recent Cleveland State University studies that focused on midstream development, such as the need for pipelines and ethane crackers. She made it clear that it’s not a question of when the Utica shale will be developed to its greatest potential, but rather a question of when and how it will be developed, highlighting that the rebound of commodity prices will determine the areas in Ohio that will be developed and when.

According to Lendel, what attracted regional crackers like PTT Global to the tri-state area is the wealth of very skilled labor, proximity to consumer markets, aligned supply chain, and the low cost of natural gas and ethane.  The conference included two Utica shale operators who are working in the heart of the Utica shale, EdgeMarc Energy and Eclipse Resources. Conference attendees heard from Callum Streeter, chief operating officer for EdgeMarc, which holds acreage in some of the most prolific natural gas areas of the state – Monroe and Washington counties.   “We have seen dramatic growth in this area. The Utica is still in its infancy,” he said.

Streeter also discussed how Utica operators are becoming much more efficient and have learned a lot from the Appalachian Basin, and how these best practices have led to the company reducing its costs to drill.

Utica wells that once took at least 20 days to drill now only take nine days for companies like EdgeMarc, he said. These greater efficiencies are reducing the costs associated per lateral foot with drilling new wells.

Another key point that Streeter made was on the importance of working with the communities they operate in, as well as regulators. “At EdgeMarc Energy, we firmly believe that we do not have the right to operate in the communities we work in. We believe we have the privilege to work there,” he said.

“We need great relationships with our regulators. We have a great relationship with ODNR. We need great relationships with those folks, the folks who regulate our industry, because our ability to grow this industry is in our ability to build relationships with our stakeholders.”

Douglas Kris, vice president of investor relations for Eclipse Resources, echoed these points, sharing optimism over the development of Utica.

“I think there is a light at the end of the tunnel,” he said.

Kris discussed the initial learning curve that Utica operators were faced with, and how Eclipse has made great strides in drilling wells faster with longer laterals to improve the overall economics of their wells. Community outreach and involvement was also a key component of their business, as well as a commitment to safety and environmental protections.

Both Utica producers stated that recycling of water is the future of shale drilling, particularly in the Appalachian Basin. Streeter explained that EdgeMarc has committed to recycling as much water as they can through its operations. “One of the great things about this industry is that we are continuing to evolve and continue to use technology,” he said

Editor’s Note: Energy in Depth is an industry advocacy group. The author of this article, Jackie Stewart, is employed by the organization.

Published by The Business Journal, Youngstown, Ohio.