Who would have dreamed that when the first commercial well was drilled in Ohio in 1860, that 150 years later Ohio would once again become “The Heart of it All?”
In an event held Thursday afternoon at the Vern Riffe Center in Columbus, the Ohio Department of Natural Resources (ODNR) released its much-anticipated 2012 production report. And it lived up to expectations. In 2012, the 87 horizontal wells reported in the Utica shale produced more than 600,000 barrels of oil and more than 12 billion cubic feet of natural gas. That is a 93 percent increase in oil production from 2011 and an 80 percent increase in natural gas production from 2011.
According to James Zehringer, Director of the Ohio Department of Natural Resources, “…Utica well production is skyrocketing…” Utica well production makes up only two-tenths of 1 percent of all the wells in Ohio, yet in 2012 Utica wells produced 12 percent of the oil and 16 percent of the natural gas in Ohio. Based on the 2012 Utica shale production numbers, a single Utica well produced as much oil as 312 conventional horizontal wells and as much natural gas as 448 conventional wells.
The December 2011 ODNR projections for new wells were also right on the mark. ODNR estimated that by the end of 2012 there would be 200 to 250 Utica wells drilled and that 50 wells would be in production. The 2012 report indicates that 215 Utica wells were drilled and 76 were in production.
How active have oil and gas companies been in Ohio? In 2012, there were 376 horizontal well permits issued, with a total of 87 wells in production. The number of horizontal well permits issued and horizontal wells drilled have both tripled, and ODNR expects that trend to continue over the next several years. Whereas in 2012 there was one application for unitization, thus far in 2013 there have been 12 applications for unitization. As of May 2013, there 31 active drilling rigs in Ohio. “Ohio is the heart of the Utica play and we believe that industry activity proves that,” said Zehringer.
Officials at ODNR also discussed midstream development as a vital component in the development of the Utica. Processing plants are under construction and will soon come online. Companies like Mark West, M3 Access/Midstream Partnership and NiSource, have made significant investments in Ohio. Indeed, these three companies alone account for capital expenditures of more than $4 billion, most of which has already been invested in counties like Harris, Noble and Columbiana.
Ohio may certainly appear to once again be at “The Heart of All,” although we suspect that the production volumes reported today may be artificially restricted by a few very basic facts. For example, all wells, regardless of how many days of actual production may be occurring individually, are reported collectively. In addition, wells that are capable of production may be restricted volumetrically by the capacity of the pipeline to which they are connected, or restricted because they are not connected.
Until final infrastructure build-out occurs, (i.e the midstream development) many wells could be restricted in the amount of hydrocarbon they may produce because of the physical limitations imposed by the pipeline capacity. More detail will be exposed in the months and years to come regarding the potential of the Utica play as these wells are produced into the growing midstream infrastructure.