Operators take a closer look at the Utica

A shale outcrop near Utica, N.Y., is the tip of a massive play that has excited operators as far north as Québec and as far south as Virginia. Called the Utica shale, its shear areal extent indicates that it will be in the news for some years to come.

The shale is middle Ordovician in age and was created from sediments deposited in warm seas about 465 million years ago. According to Oilshalegas.com? , estimates of reserves range from 2 to 69 Tcf, an obvious indication that much is yet to be learned about this play.

An extended flowback test is performed at Saint-Francois-du-Lac #1. (Images courtesy of Gastem)

Often compared to its shallower cousin, the Marcellus shale, the Utica is thicker and much more geographically extensive. According to Geology.com? , it also has a higher carbonate content than the Marcellus and a lower clay mineral content. “This difference in mineralogy produces a very different response to hydraulic fracturing,” the website states. “The methods used in the Marcellus do not produce as much fracturing in the Utica. However, future research might be able to significantly improve the fracturing rate.”

The play underlies parts of Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, West Virginia, and Virginia as well as extending into Canada. “If the Utica is commercial throughout this extent, it will be geographically larger than any natural gas field known today,” the website states.

Utica players
Gastem was one of the early movers in the play. A Québec-based oil and gas exploration and development company, Gastem has rights to more than 1.1 million acres of land in the St. Lawrence Lowlands, the Gaspe Peninsula, and the Magdalen Islands in Québec. Its wholly owned subsidiary, Gastem USA, holds exploration licenses to about 34,400 acres in New York as well as 1,200 acres in Virgina.

CEO Raymond Savoie said his company, which was listed in early January 2004, was principally involved with some of the gas plays in the lowlands, particularly south of Montreal. At the time, though some of its acreage covered the Utica shale, the company was focused on drilling collapsed grabens. By 2006, however, company officials started to catch wind of the fact that the Utica might, in fact, be as big a play as some of the shales in the US.

“It mostly started in 2006 in Québec,” Savoie said. “There were a couple of companies that were snooping around – Talisman and Forest Oil – and they were talking about the Utica like something that might have potential. There was a lot of belief in it. This forced us to look at the Utica pretty hard. We raised some funds and drilled the first two wells to specifically test the Utica. When we cored them, it all came together – the numbers were there. And we said, ‘We’ve got a play.’”

Like most shales, the Utica’s existence was no secret. Savoie said a professor from McGill University did some work for several companies in the 1940s and 1950s that were looking for oil in the Québec Lowlands. “There was no interest in gas at that time,” he said. “But he wrote some notes that I stumbled onto in 2005 mentioning that the Utica, if it could be properly tested and ‘broken’ with water, would probably yield some interesting quantities of gas.”

A field hand prepares a connection at Saint-Louis-de-Richelieu #1.

Gastem also has acreage in the Marcellus shale in New York. Savoie said the two shales differ greatly. “The Marcellus is richer,” he said. “It has some production history, and Utica doesn’t. Right now, the Marcellus is a more reliable play than the Utica. The Utica is still finicky, and it still has a way to go.”

But Gastem’s New York acreage ultimately could prove to be a triple treat – the Utica shale lies under Oneida sands, which in turn lie under the Marcellus shale. Savoie said that his company has drilled some wells to test various approaches and find areas where production from all three zones can be combined. “That will give us some good numbers, we think,” he said.

Utica feeding frenzy
The areas in which Gastem holds acreage are relatively quiet – the Québec acreage is taken, and activity is slow in New York while the industry awaits the resolution to a temporary ban on hydraulic fracturing.

In other areas, the land grab is in full swing. An article in the Columbus Dispatch described the scene in Columbiana County, Ohio, where as many as 40 oil company representatives file into the land office every day. The county had seen 600 new mineral rights leases as of Nov. 20, 2010, more than three times the number of the previous year. In Harrison County, Ohio, the office was so full that people were sitting on the floor.

An example of the stacked pay typical of Gastem’s properties in New York.

West Virginia also is seeing Utica interest. Mining and oil and gas company Consol struck gas in October 2010, with its vertical Belmont County well producing 1.5 MMcf/d. Not surprisingly, the company announced that it would shift some of its 2011 investment dollars into further Utica exploration.

Other states are handling the Utica more calmly. Savoie said it is very deep in Pennsylvania, making it a less likely target than the shallower Marcellus. Michigansaw a bit of a rush in 2009, but more recently, operators have been interested in shallower shale there as well.

The next Barnett?
According to Geology.com?, the main challenges for future development of the Utica are its depth and a lack of information. “In areas where the Marcellus shale is present, the Utica shale is probably going to be a resource of the distant future,” it states.

It also is premature to compare it to other shale plays such as the Barnett shale in Texas. But Savoie thinks it has real potential.

“The Barnett is unique,” he said. “They worked at it for 10 years before they got it down pat, and even now there are areas with good commercial interest and areas without. I think it’s going to be the same with the Utica.

“Technology may catch up, and we may be able to get at those areas that are less promising today. For now, with the technology and information that we do have, the Utica will most certainly be a good player for the long term.”

He added that production figures might not be as high as other shales, but the shear scope of the Utica will make it a prolific play. “It’s like a Walmart,” he said.