Chesapeake Declares Eastern Ohio RICH IN OIL!

Matthew Steffy of the Tribune Chronicle (July 29, 2011) reported an announcement made by Chesapeake:  "Utica Shale in eastern Ohio is liquid rich."  These results follow two years of "proprietary geoscientific, petrophysical and engineering research performed by Chesapeake. Eastern Ohio Utica Shale is said to be "characterized by a western oil phase, a central wet gas phase, and an eastern dry gas phase."   Chesapeake who currently holds 18 of the 24 drilling permits in Ohio plans to drill 20 wells by 2012 and 40 wells by 2014.  The discovery is said to increase the value of Chesapeake by $15 to $20 billion.

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Permalink Reply by Tanya Gabriele on August 2, 2011 at 12:33am
Someone owns 800 acres in Braceville?  Is the owner the State of Ohio?  I always thought that land was swampy. It will be interesting to learn how productive that piece will be.  800 into 1,2 million is $1,500 an acre.  I hope the owner gets more for his money in royalties.
Permalink Reply by John Hippely on August 2, 2011 at 10:53am
the 800+ acres I speak of is not all in one parcel but it is all several parcels close together as part of an active small family farm. and i can only speak on specific details about my lease. i didnt quibble over a few hunderd either way per acre I chose to put my eggs in the royalty %. over the life of an average well, the royalty % is much more preferable to an up front payment.
Permalink Reply by Tanya Gabriele on August 3, 2011 at 12:19am
I am curious as to how things will pay out.  I have a friend in Vienna who has a clinton well.  The tank is always topped with oil because BOCAR leaves it there.  I have a brother-in-law who is also a well tender who has many wells topped with oil and the oil is not moving.  He said the people he contacts to ship the oil said the oil isn't moving because the refineries are full.   Landowners don't get paid when the oil sits--unless you put in your contract that you charge for storage.  If the refineries can't handle all of this oil--what is the use of having more oil drawn from the ground?
Permalink Reply by Tanya Gabriele on August 3, 2011 at 12:21am
Along with that--if the infrastructure isn't in place to pipe the gas--how long do you expect to wait for royalties?
Permalink Reply by Jim Litwinowicz on August 3, 2011 at 2:29am

"Oil sits because refineries are full"  I'm guessing that is local refineries as it doesn't pay to ship oil by truck to distant refineries. We have very few refineries left in the area so it wouldn't take much oil production to hit capacity.

 

Which brings up an interesting issue. If CHK is right about the Utica being a huge oil play,  what will they do with it? Will pipelines be built to ship it south for refining or will refineries be built/expanded here? Either option will take time, money, and people to get it done. That brings opportunities for some but will delay the reward for landowners.

 

It is going to be several years, probably a decade or more, before the infrastructure is ready to handle any large oil production out of the Utica.

Permalink Reply by Paul Martinelli on August 3, 2011 at 4:00am
A refinery will be built on the Ohio river
Permalink Reply by David Mohn on August 3, 2011 at 4:04am
Just a thought but maybe some tanker type ships that can travel down the Ohio river to the Miss. River to the gulf and then to the Texas refineries.  You never know?  Sometimes you just have to think outside the box. 
Permalink Reply by Finnbear on August 5, 2011 at 1:53am

Probably not a normal oil refinery but a fractioning facility for processing natural gas ("wet" gas from the Utica).

Dominion to Begin Construction on New Natural Gas Processing, Liqui...

From the article:

"The Natrium site is an ideal location," said Gary Sypolt, chief executive officer of Dominion Energy.  "We will have the capability to access production in both the Marcellus and Utica Shale regions, and ship products via barge, rail, truck and pipe, thus offering significant value to producers."
Permalink Reply by scott peterson on August 3, 2011 at 4:18am
It will take time but i dont think a decade. It didnt take them that long in the Dakotas to get things in place, I assume Ohio will be no different.
Permalink Reply by Jim Litwinowicz on August 3, 2011 at 4:44am

The Bakken field in the Dakotas was an old field that had much of the infrastructure already there.  It just became much more productive after the new technologies were developed.  There are pipelines running from the Dakots to Ok City but even they are now inadequate to handle all the oil coming out of the Bakken. But at least the right-of-way is there to allow for more lines to be installed.

 

Ohio and Pa are very different, with hundreds of towns and tens of thousands of landowners that all have to give permission for pipeline right-of-ways. There will be court fights over right-of-ways.

 

And building refineries will take a lot of governmental redtape. All the NIMBY"s will be out in full force when a company proposes a new refinery.

 

Barges are a good alternative for the first production near the Ohio River. But any large scale oil production will need a lot of capacity, especially further from the river system.

 

Just saying this is gonna take some time to crank up. Some will happen in a few years. But the big production will take many years.  And it will change the economy of the entire region.

Permalink Reply by scott peterson on August 3, 2011 at 4:49am
I agree but dont forget about railroads. I think they relied heavily on them out there but of course they probably have alot more railways in place than we do.
Permalink Reply by Missy Boardman on August 3, 2011 at 1:00pm

I think you may be onto something.  If you look at the satellite view of the well location in August twp in Carroll County you'll see RR tracks to the South.  And get this,  a Marathon petroleum pipeline that goes where?  To the Marathon Refinery in Canton about 20 miles away.   

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