An article in the Warren, OH Tribune Chronicle is interesting for two reasons: The first is that it highlights how when a local business (VEC Inc.) gets plugged in to the shale supply chain with just a single driller, it can radically change the fortunes of that company; and second, the article indicates the driller in question (BP) has just handed out contracts for their first four well sites with plans to drill up to 2,000 Utica Shale wells–all in Trumbull County, OH.
The Ohio Dept. of Natural Resources (ODNR) recently issued two new “unitization” (or forced pooling) orders, bringing the total number of unitizations to four that they’ve issued in the Utica Shale. Both of the new orders were issued on behalf of BP and both were in Trumbull County. Here’s the details of the two orders, including how much the reluctant landowners were awarded as a bonus and how much they’ll make in royalties:
Many people eagerly await Ohio’s annual production numbers, which will (hopefully) be out sometime later this week. Drillers had to file their production numbers no later than yesterday, Mar. 31. MDN has brought you some of the recent “idle” speculation that inevitably happens while waiting. The speculation lately has been along the lines of, “Is the Utica really all it’s cracked up to be?” (see More Angst Over OH Utica’s Oil Prospects). It is natural gas liquids (NGLs) and oil that makes the Utica special. If it turns out Utica production is mostly dry gas (methane only), it will be a major disappointment.
Investor websites are famous for analyzing this stuff to death before any hard data is available. We say: Let’s see what the numbers actually say! In the meantime, yet another “idle speculation” article on one of our favorite sites, The Motley Fool, once again talks about the potential for the Utica. However, a big part of the article interests us. It’s a handy, condensed roundup of the major energy companies that are active in the Utica Shale: Continue reading
Whoops! Not much of story—but that’s been the entire story for a year now. After leasing all of that land in Trumbull County, BP has done no Utica Shale drilling. Zip, zero, nada. Earlier this year BP said, in essence, they’re taking their sweet time, but they do intend to drill a few initial wells this year, perhaps starting in April (see BP in OH Utica Shale: The Prospectivity of Producibility). Looks like the wait may be over…
The BP-Husky Refinery, a 94 year-old oil and gasoline refinery in Oregon, OH (near Toledo), showed off a $400 million upgrade yesterday. The new upgrade took two years and 1,500 short-term workers to complete and will make the refinery more efficient, less polluting and enable it to refine better grades of gasoline.
The interesting part for MDN readers: Right now the refinery gets most of its crude oil from Canada, but new sources of crude are starting to flow from Ohio itself, as well as Pennsylvania and West Virginia—from the Utica and Marcellus Shale. The upgraded refinery has more flexibility to process different types of crude, including Ohio crude…
The regional president for BP North America Gas, Tim Harrington, say’s it’s early days yet for exploiting the Utica Shale for gas, oil and liquids. In a presser on Friday, Harrington used a few words MDN hasn’t heard before—words like “producibility” and “prospectivity.”
The upshot of Harrington’s talk? BP will figure out what their prospects look like in Ohio’s Utica Shale over the next two years…
Energy giant BP, like energy giant ExxonMobil, are both drillers in the Marcellus and Utica Shale plays. They both also publish an annual energy outlook that shares their latest thinking about where the world’s energy markets are headed in the next few decades. ExxonMobil’s annual Outlook for Energy was published in December (see ExxonMobil Predicts World Fossil Fuel Usage Up 5% by 2040). BP’s Energy Outlook 2030 was just released this month (full copy embedded below). The word “shale” appears a lot.
In March 2012, BP signed a huge deal with landowners belonging to the Associated Landowners of the Ohio Valley (ALOV) group to lease 84,000 acres in Trumbull County, OH (see BP’s Big Utica Shale Deal, Leases 84K Acres in Ohio). The terms of that deal were $3,900 per acre as a signing bonus and 17.5% in royalties. Very sweet indeed.
Part of the process when signing a lease deal is “due diligence” in researching property deeds to be sure the driller will have a clear right to drill on or under the property. About 180 landowners with a collective 4,203 acres didn’t make the cut for the ALOV deal, and their contracts, according to the terms of the lease, were “released” this week by BP:
Yesterday at a press conference in Youngstown, OH, BP announced plans to move into a new office and warehouse space in the Youngstown Commerce Park (see this MDN story). At the same event, BP officials spoke about their concerns that pipeline and processing plant infrastructure in Trumbull and surrounding counties may be quickly overwhelmed once BP’s drilling program is in full swing.
What do BP’s public comments mean? More pipelines and processing plants are likely on the way in Trumbull County:
Important Update: BP will not start drilling test wells until April 2013, not January as indicated in the headline (and as quoted in the story below). The news source quoted by MDN was inaccurate! Many thanks (and a hat tip) to MDN friend Andrea Wood, Publisher of the Youngstown Business Journal, for taking the time to notify us of the error.
BP announced yesterday they have begun moving into the company’s new “Utica Operations Center,” a 5,000 square foot office space with 38,000 sq ft of warehouse/storage space located in the Youngstown Commerce Park in North Jackson (Mahoning County), Ohio. BP aggressively leased Ohio Utica Shale acreage during 2012—signing up some 100,000 acres of leases this year. Of the Ohio acreage leased by BP, the vast majority (84,000 acres) is in Trumbull County, close to the new office space.
Ohio landowners who signed with BP, and businesses interested in supplying BP with products and services, will be interested to know BP plans to start drilling their first Utica Shale test wells in January 2013 (more details below).
Dawn Constantin, head of partnerships and analytics at BP plc, spoke at the LDC Gas Forum in Toronto earlier this week about what the future holds for the natural gas liquids (NGLs) market. Her analysis? Drillers who thought NGLs (wet gas) were a safe harbor against the low price of methane (dry gas) may not find it so safe after all. Why? Simple economics of supply and demand. Demand for NGLs is not keeping up with the flood of supply coming from places like the Marcellus and Utica Shale.
Constantin said there now exists downward pressure on the price of NGLs, just like there is for dry gas:
Each year Platts publishes a list of the top 250 energy companies in the world. They evaluate companies using four metrics: asset value, revenue, profit, and return on invested capital. It probably won’t surprise you to find out that 7 of the top 10 energy companies in the world have a presence in the Marcellus or Utica Shale.
Here’s the Platts list of the top 10 energy companies in the world for 2012:
Although Carrizo Oil & Gas and CONSOL Energy have both either left or stopped drilling in the Utica Shale in Trumbull County, Ohio, energy giant BP says they’re staying the course and expect to drill their first well in Trumbull in April 2013. Of course, BP has a vested interest in making it work in Trumbull—they leased 80,000 acres in the county last year for $331 million.
Here’s what a BP spokesman recently said about Trumbull County:
More evidence of BP expanding their lease purchases in Ohio: Gunter Land Services, a landman agent for BP, has set up offices in Lisbon, Canton and Poland, OH. BP has also set up offices in Warren, OH. The landmen are actively canvassing landowners in the area in hopes of stringing together a new large block of acreage that BP can begin drilling “sometime next year.”
An article in Crain’s Cleveland Business yesterday takes a look at the pattern of investment in the Utica Shale play in Ohio. According to the article, the Utica follows the same model found in other areas of the world: First smaller independent oil and gas companies invest doing the “retail” work of going house to house to get leases signed. They may even drill a few wells. But soon after, larger o&g companies, the “majors” descend and buy up many of those investments.
The article shares some interesting facts and figures about the current status of investment and development of the Utica in Ohio, among them: