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Utica Shale: What's the Potential?

The Utica Shale holds an estimated 38 Tcf of undiscovered, technically recoverable natural gas, or less than half that of the Marcellus Shale, according to the first assessment of the Appalachian Basin play by the U.S. Geological Survey (USGS). An estimated 940 million bbl of unconventional oil resources and 9 million bbl of natural gas liquids (NGL) also are trapped in Utica rock, said scientists last week.

The USGS assessment, published Thursday, followed an indepth report by IHS Inc. researchers last week, which said early natural gas data is encouraging for the Ohio and western Pennsylvania portion of the play, and if if the oil-prone window is successfully derisked, the play could prove to be a triple-play hydrocarbon monster.

According to the USGS assessment, undiscovered natural gas in the Utica Shale ranges from 21 Tcf (95% chance) to 61 Tcf (5% chance), while oil estimates were put at 590 million bbl (95%) to 139 billion bbl (5%). Undiscovered NGL amounts range from 4 million bbl (95%) to 16 million bbl (5%), the assessment said.

By comparison, the Marcellus Shale contains an estimated 84 Tcf of undiscovered, technically recoverable gas and 3.4 billion bbl of undiscovered NGLs, the USGS reported last year (see NGI, Aug. 29, 2011). The Greater Green River Basin in southwestern Wyoming also is estimated to contain about 84 Tcf of undiscovered natural gas, of which 82 Tcf is tight gas, said the Department of Interior agency.

"Understanding our domestic oil and gas resource potential is important, which is why we assess emerging plays like the Utica, as well as areas that have been in production for some time" said USGS's Brenda Pierce, who coordinates the energy resources program. "Publicly available information about undiscovered oil and gas resources can aid policymakers and resource managers, and inform the debate about resource development."

Technically recoverable resources are considered to be quantities of oil and gas producible using currently available technology and industry practices, regardless of economic or accessibility considerations.

The initial Utica assessment covers a 15 million-acre swath of shale rock that extends across Maryland, New York, Ohio, Pennsylvania, Virginia and West Virginia, with the shales "mostly present" in New York, Ohio, Pennsylvania and West Virginia. The play, which lies beneath the Marcellus Shale in the Appalachian Basin, is the "longest producing petroleum province" in the country, USGS said. The assessment is an estimate of continuous oil, gas and NGL accumulations in the Upper Ordovician Utica Shale of the Appalachian Basin.

"The Utica has little history of production, therefore production data were supplemented with analog data from the Devonian Marcellus Shale, Cretaceous Eagle Ford Shale and Cretaceous Niobrara Formation," the assessment said. "The Marcellus is an analog mainly for its proximity and similar geologic setting, and the Cretaceous units for their facies similarity. Analog data include estimated ultimate recoveries (EUR), mean drainage areas of wells, and ranges of well success ratios." The Utica was found to contain both "sweet" and "nonsweet" spots.

"Because of the limited amount of existing production from the Utica to date, EUR distributions for the sweet and nonsweet spots were estimated from distributions of other shale oil assessments. Based on these input parameters, recovery of the resource would require at the mean about 7,000 wells to be drilled within the sweet spot and an additional 10,500 wells at the mean to be drilled in the nonsweet spot to extract this potential."

IHS researchers last week said it may be early to know if the productivity power of shale play will match other U.S. unconventional plays, but initial data is encouraging.

"To date, horizontal drilling results in the Utica have been very encouraging, with activity so far focused on targets within the wet gas window," said IHS's Andrew Byrne, who directs energy equity research and who authored the "IHS Herold Utica/Pleasant Point Shale Regional Play Assessment."

"Approximately two-thirds of the horizontal wells drilled on the play have reported 24-hour initial production (IP) rates of 1,000 boe/d or more, which supports our opinion that early results are encouraging," Byrne said. "However, the Utica is still in the very early stages of exploration; only in late 2010 did the industry start moving from drilling vertical exploratory wells in the play to permitting horizontal wells."

With only a few horizontal wells drilled, it's premature to declare the "sweet spots" within the play, he said. The most productive liquids-rich wells to date are in Ohio's Harrison and Carroll counties and are operated by Chesapeake Energy Corp., "the most dominant company in the play in terms of total acreage and wells drilled."

According to the IHS Well and Production Database, more than 135 drilling permits have been granted for Utica horizontal wells, but only 11 have been completed with IP test volumes. Drilling depths for the Utica ranged from about 6,000 feet total vertical depth (TVD) to 9,000 feet TVD. Typical wells in the Eagle Ford Shale have depths ranging from 9,500 feet TVD to 11,500 feet TVD, IHS noted.

Chesapeake's key Kenneth Buell-8H (Utica) well in Harrison County has delivered the best production to date with a TVD of 8,564 feet (see NGI, April 9; Oct. 3, 2011). The 1,350 boe/d production rate compares favorably with other liquids-rich plays, said Byrne.

"Initially, we expected the Utica's proximity to northeastern U.S. would result in premium pricing for natural gas similar to the Marcellus Shale. However, recent prices in the region suggest that this is no longer a safe assumption. The play is somewhat shallower than the Eagle Ford, which means the wells should be less expensive to drill, so there should be some cost advantages."

According to IHS, an assessment of the Utica's well distribution analysis "gives the current productivity advantage to the Eagle Ford play." Ohio only reports production on an annual basis, making a "true peak 30-day rate" unavailable. Instead, IHS derived "an inferred" 30-day peak rate by taking the actual 24-hour IP rate and reducing it by 40%, which researchers determined was a reasonable number.

The three best wells in the Utica have calculated production rates of more than 750 boe/d, according to IHS. However, all three wells are are in the gas-prone window and are reported to have flowed 100% natural gas. "The Utica well distribution performance is encouraging, considering the early stage of the play, with a large percentage of wells coming in at 600 boe/d or more," researchers said.

"Based on our early research, it appears the vast majority of the Utica liquids volumes are lower-value, natural gas liquids (NGL)," said Byrne. "Therefore, much of the economic outlook for the play relies upon not only natural gas prices, which remain low, but also prices for natural gas liquids, which have been highly volatile.

"Successful de-risking of the oil-prone window would greatly enhance the attractiveness of the play. We also believe that additional experience and technological advancements, as well as infrastructure buildout, offer the potential for improved well performance over the early data."

The initial horizontal drilling results in the oil-prone window only now are becoming available. Anadarko Petroleum Corp. has reported the "best oil-weighted well drilled to date" in Noble County, OH (see Shale Daily, April 20). The Brookfield A-3H well in 1Q2012 "tested at a 24-hour IP rate of 731 boe/d (82% oil and condensate).

"Anadarko has 390,000 gross acres prospective for the Utica. Devon Energy Corp. also has several wells in process in the oil-prone window, which IHS believes will deliver critical insights regarding the relative attractiveness of the area," researchers said. The largest acreage holders in the play are No. 1 Chesapeake Energy and No. 2 EnerVest Ltd., which are both seeking partners in the play.

EnerVest disclosed plans to sell most of its Utica leasehold last month (see NGI, Sept. 24). Chesapeake, which sold a one-quarter stake in its Ohio leasehold to French oil major Total SA late last year, continues to look for other joint venture partners in the play (see NGI, Sept. 17; Feb. 20).

The IHS Herold assessment also includes insight into the exploration and production activity in the region, discoveries to date and estimated reserves, along with company valuations for some of the key acreage holders in the play.

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