Tuesday, October 11, 2011

Utica Shale Less Known than Marcellus, Potential Uncertain

The Utica Shale, thousands of feet below the Marcellus, remains a bit of a mystery. Operators are only just now beginning to penetrate and produce from the Utica using horizontal drilling and hydraulic fracturing. The Utica is somewhat thinner and more widespread than the Marcellus and operators are scrambling to establish good drilling positions and gain an understanding of what the Utica Shale holds.

All across Central and Eastern Ohio and Western Pennsylvania oil and gas companies are searching titles and going through the necessary steps to be ready to start the process of drilling. Some companies, like Chesapeake Energy, have already made significance progress in understanding the potential of the Utica Shale and many other companies are close on their heals.

The depth of the Utica Shale is one aspect of this shale formation that requires special considerations. With the Utica Shale averaging 2,500 deeper than the Marcellus in many locations, drilling costs will be higher making economics a more important consideration. And like the Marcellus, thickness and depth of burial are important as well. Too shallow, less than 2,000 feet in depth for example, and the shale has likely not contained the gas or oil. Too thin, and the zone is not of sufficient thickness to produce hydrocarbon in sufficient quantities. 

What the Utica Shale has going for it in many areas is the propensity for producing "wet gas" and oil. "Wet gas" refers to the many petroleum derivatives like ethane and butane that bring a higher sales price. Economically, wet gas or oil are more highly desired in this era of comparatively depressed gas prices. BTU to BTU, oil is worth three times what gas is in the current environment so that will have oil and gas companies chasing the more "liquid plays" as long as those economics hold, and that is the case predicted out for the next few years at least.