May 14, 2016 - 11:10 AM EDT
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Three-state Appalachian Basin with Utica, Marcellus shales has become No. 1 U.S. source of natural gas

May 14--In 2010, the Marcellus Shale in Pennsylvania and West Virginia was dubbed the Beast in the East by analysts because of its impressive natural gas treasure.

In 2013, Ohio's neighboring Utica Shale was described as Son of the Beast in the East by analysts because of its growing natural gas potential.

The growth of drilling in the Marcellus-Utica shales and the resulting natural gas boom are changing the American energy picture, even though shale drilling is slowing down across the United States due to low commodity prices.

Since 2012, Ohio, Pennsylvania and West Virginia have accounted for 85 percent of U.S. shale gas growth, according to the U.S. Energy Information Administration. Shale gas today represents two-thirds of U.S. natural gas production, the agency reported recently.

The three-state region, also known as the Appalachian Basin, has switched from being among the biggest users of natural gas to its biggest producer.

Leaving the state

Natural gas from the Utica and Marcellus shales is heading to Virginia, the Carolinas, New England, the Gulf Coast, St. Louis, Chicago, Detroit and Ontario. Pipelines are being reversed to get it to market. Soon it will be heading to American and Canadian ports to be turned into liquefied natural gas and shipped in tankers to Europe and Asia

Drilling began in the Marcellus Shale in 2003 in Pennsylvania. It followed in West Virginia. There has been little Marcellus drilling in Ohio. The rock in Ohio is too thin.

But in 2010 drilling began in the deeper Utica in Ohio. That is just beginning in West Virginia and Pennsylvania. Such deeper drilling is more costly with a greater risk and problems.

Ohio is about seven years behind Pennsylvania and West Virginia in drilling development, experts say.

To date, 14,022 shale wells have been drilled in the Utica-Marcellus in an arc that runs from southern Western Virginia to the north into Ohio and Pennsylvania and then east into northern Pennsylvania.

That number from 2004 through 2015 came from Penn State University's Marcellus Center for Outreach and Research.

Pipelines and processing plants have been built in the three states and multibillion-dollar ethane crackers have been proposed.

Booming business

What's happened in the Appalachian Basin is huge, according to Tim Knobloch of James Knobloch Petroleum Consultants of Marietta and Martin Shumway of Shumway Resources LLC of Worthington.

In a report prepared by both men, Knobloch told the recent Ohio Oil and Gas Association winter meeting that drilling in the three-state region has resulted in 8,000 wells since 2008 and $150 billion in investment.

That includes $80 billion to drill the Appalachian Basin wells, $60 billion in mergers and acquisitions since 2010, $5 billion for leases and $5 billion for infrastructure, he said.

Production in the Utica Shale continues to grow. It reached 953 billion cubic feet of natural gas in 2015, according to the Ohio Department of Natural Resources.

One billion cubic feet is enough to heat 24,000 houses for a year.

But Ohio's total pales compared to production data from the Marcellus Shale. In Pennsylvania, drillers in 2015 produced 4.18 trillion cubic feet of natural gas. West Virginia produces about 1 trillion cubic feet annually.

According to Shumway and Knobloch, the cumulative amount of natural gas pulled from the three states since 2007 totals 16 trillion cubic feet -- with another 40.1 trillion cubic feet waiting to be tapped.

At its peak in 2011, the three states had 170 drilling rigs at work.

Slowdown in drilling

The number of drilling rigs in the three states has dropped to 40 in early 2016, Knobloch said.

That total has 11 rigs in Ohio, 19 in Pennsylvania and 10 in West Virginia, he said.

Pennsylvania peaked in 2011 with 129 rigs and West Virginia had 31 rigs in 2013. Ohio peaked in 2014 with 46 rigs.

Since 2010, the three states have approved 28,854 shale drilling permits, through early 2016, Knobloch said.

That includes 22,189 Pennsylvania permits, 4,340 in West Virginia and 2,325 in Ohio.

Of that three-state total, 9,955 shale wells are in production, he said.

That includes 6,619 in Pennsylvania, 2,092 in West Virginia and 1,244 in Ohio through early 2016, he said.

Oklahoma-based Chesapeake Energy Corp. is the No. 1 operator in Ohio with 471 wells. It is followed by Gulfport Energy Corp. with 125 wells and Antero Resources with 72 wells.

More top dogs

In Pennsylvania, the top operators are Range Resources with 842 wells, Chesapeake with 717 wells, Talisman Energy with 421 wells and Cabot Oil and Gas with 415 wells. In West Virginia, the top operators are Antero Resources with 191 wells, Chesapeake with 185 wells and EQT Corp. with 184 wells, Knobloch said.

The Ohio counties with the most wells drilled are Carroll with 379, Harrison with 180, Belmont with 104, Noble with 102 and Guernsey with 93, he said.

In Pennsylvania, Bradford County has 983 wells, followed by Washington County with 980 and Susquehanna County with 855.

In West Virginia, Wetzel County is No. 1 with 191 wells. Marshall County is second with 185 wells and Harrison is third with 184 wells, he said.

The Marcellus Shale area is three times bigger than the Utica Shale. It covers 28,400 square miles. The Utica Shale covers 9,400 square miles.

The best drilling area in the Utica Shale is 17 square miles in Belmont County, Knobloch said. In the Marcellus Shale, it is 380 square miles in northern Pennsylvania, he said.

Utica potential grows

It is very possible that the Utica Shale may grow to be larger than the Marcellus Shale, especially if New York state ends its nearly eight-year-old moratorium against fracking, said Dr. Jeffrey Dick, a professor and chair of the department of geological and environmental sciences at Youngstown State University and a drilling expert.

Several successful Utica wells have been drilled in northern Pennsylvania and more recently in southwest Pennsylvania and northern West Virginia, he said.

That makes it appear likely that the Utica Shale is far bigger than had been thought and that drilling the Utica could go on for a long time, he said.

The average Utica well from 2010 to early 2015 had 7.2 billion cubic feet of equivalents of estimated ultimate recovery or the potential volume of product that might be produced.

The Ohio counties with the highest total reserves are Carroll, Belmont and Harrison.

The Ohio counties with the highest reserves per 1,000-foot of laterals -- a way to identify the best drilling spots -- are Belmont, Monroe, Jefferson, Noble and Harrison counties, Knobloch said.

The top Ohio operators based on total reserves are Chesapeake Energy, Gulfport Energy and Antero Resources.

The Ohio operators with the best drilling spots are Rice Energy, XTO Energy, Gulfport Energy and American Energy Utica.

The top counties for reserves are Susquehanna, Bradford and Washington in Pennsylvania and Harrison, Wetzel and Doddridge in West Virginia.

Bob Downing can be reached at 330-996-3745 or [email protected].

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(c)2016 the Akron Beacon Journal (Akron, Ohio)

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Source: Equities.com News (May 14, 2016 - 11:10 AM EDT)

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