Current Issues and Challenges in Integrating the Marcellus and the Utica

Current Issues and Challenges in Integrating the Marcellus and the Utica

The recent large dry gas finds in the Utica/Point Pleasant play in Ohio, West Virginia, and Pennsylvania brought comments about the big wells having the potential to prolong the Appalachian gas supply glut. However, these wells are deep, very high pressure, have drilling issues, are expensive to drill and complete, and take considerable time to drill and complete. When asked about the effects of the big Utica dry gas wells, Derek Rice, VP of Rice Energy, at the AAPG Pittsburgh Playmakers Forum, pointed out that a rig working the deep Utica could drill maybe 8-10 wells per year while a rig working the Marcellus might drill 30. Thus the Marcellus is still a far superior production growth engine. While that may change in the future but it is expected to take quite some time. He also pointed out that when comparing the Marcellus to the Ohio wet Utica that even though the Marcellus has a slightly higher EUR per 1000 ft of lateral than the Utica, the Utica is more “front-end loaded” so that rates of return are just as good in the Ohio Utica and sometimes even better in the early years.

BTU Analytics recently pointed out that since the big wells in the Utica are dry gas wells they require dry gas gathering systems in an area that has developed wet gas gathering systems. This will also likely slow down large-scale fast development, even though Range and EQT have announced a joint venture to develop large-scale dry gas gathering in their producing areas. This type of thing will be required to develop dry gas in a wet gas area but there are possible offsetting advantages explained in the next paragraph.

With requirements for excess ethane to be recovered out of wet gas streams in order to meet pipeline specs there is perhaps an opportunity to blend Utica dry gas in order to lower the BTU in certain areas and among certain operators to meet those specs so they would not have to recover as much ethane at a loss as is current. The point may be moot as ethane demand picks ups due to ongoing and planned fractionation facilities, pipelines, exports, and cracker plants or if ethane prices improve – but timing and forward pricing prediction may dictate what happens.

Infrastructure sharing on large multi-well pads (incorporating up to 48 wells on a pad by one estimate!) can lead to significant savings in time and cost. Multiple reservoirs: Utica, Marcellus, Upper Devonian Burket/Geneseo, and possibly Upper Devonian Rhinestreet, can make it possible to put more wells on a single pad closer together. Of course, there are some significant logistics issues with such projects with anti-collision, equipment moving planning, scheduling, and emergency response. The Marcellus and Utica can share pad space and infrastructure in Monroe County, Ohio, in the northern panhandle of West Virginia, in Southwest PA, in Northeastern PA, and possibly at some future time in north-central PA. The Burket/Geneseo can do the same as well in many of these areas. There is also the added benefit of a smaller overall footprint for a massive amount of gas production although the larger pads with massive infrastructure may add to the public perception of an industrialized landscape. For this reason the large pads should be sited very carefully. 

With the current constraints on gas prices and access to capital planned development of the deep Utica dry gas resource will remain limited at current high well costs. While drilled and completed well costs are expected to get down into the $12MM range at present they are closer to $16MM or more. Thus Marcellus and shallower wet Utica will continue to provide bulk of Appalachian production.

The recently drilled 18,000 foot lateral in the Utica/Point Pleasant drilled by Eclipse Resources in Monroe County, Ohio should be an interesting study. Though such long laterals are unlikely to make up a significant amount of drilling due to acreage constraints, 10,000 and 12,000 foot laterals are becoming more common. Such long laterals are likely to be confined to areas like Ohio Utica where there is less geological structure. Issues with ‘friction’ during the toe section completions should be interesting to find out about. Are such long laterals feasible? We know that 10,000 laterals are feasible but the jury is still out on the longer ones.

References:

Building a Pure Play Appalachian Basin Company Amongst the Legacy Players – by Derek Rice, V.P. of Exploration, Rice Energy, in AAPG Pittsburgh Playmakers Forum, April 13, 2016

DUCs, COBs, and the Ceiling on Marcellus Production – by Erika Coombs and Matthew Hoza, BTU Analytics, Webinar, April 21, 2016