After three years of increased exploration drilling and skyrocketing lease rates, Ohio should soon see Marcellus Shale development drilling, according to one state official.
"We're probably where Pennsylvania was in 2007," Tom Tugend, deputy chief of the Ohio Department of Natural Resources' Oil and Gas Program, told NGI's Shale Daily. "A lot of leasing and exploration, but not a lot of horizontal drilling." Now, though, considering both the increase in permit applications for horizontal wells and the large amount being spent on leasing, "I think that's going to change over the next three months," he added.
Although the Marcellus Shale formation extends into eastern Ohio, drilling companies haven't explored the state to the same extent as Pennsylvania or West Virginia, (or shown as much interest as they have in New York, where there is currently a moratorium).
Ohio has issued 76 drilling permits into the Marcellus Shale since 2004, leading to 44 wells drilled in five southeastern counties along the West Virginia border: Belmont, Jefferson, Monroe, Washington and Noble. The vast majority of those wells have been drilled vertically to around 5,500 feet. However, a few companies, particularly The Woodlands, TX-based Marquette Exploration LLC, have permitted and drilled horizontal wells. The junior explorer was founded in 2006 in partnership with ENCAP Investments LP.
In addition to the existing permits for wells yet to be drilled, Tugend noted that the Ohio DNR is also processing new applications, including some of the first from Chesapeake Energy Corp.
Although most of the current shale drilling going on in Ohio is targeting the Marcellus, the deeper Utica Shale could ultimately draw as much activity in Ohio, if not more.
The Marcellus thins considerably as it heads west, from 200 feet in parts of western Pennsylvania to 50 feet in eastern Ohio, according to the Pennsylvania Geologic Survey. In central Ohio, though, the Utica Shale underlies a much larger area and is a much thicker target, as well. Larger natural gas companies like Consol Energy have recently expressed an interest in exploring the Utica (see Shale Daily, Nov. 01, 2010).
The Utica formation, though, has not yet seen the leasing explosion now under way in the Marcellus.
As recently as last summer, landowners in the Marcellus Shale region reported getting lease rates between $30 and $40 per acre, but that range is now between $500 and $2,000 an acre, according to Dale Arnold, director of energy services for the Ohio Farm Bureau.
"That jump has probably been over the last four and a half to five months," Arnold said.
While leasing is focused on Belmont and Monroe counties, it is increasingly moving northwest into Guernsey, Harrison, Jefferson, Carroll, Tuscarawas and Stark counties.
Meanwhile, lease rates in the Utica Shale remain at or near historic levels between $5 and $30 an acre, but are now increasing in the wake of reports from the Marcellus region.
"You're starting to see prices start to escalate," Arnold said.