The Utica shale is on its way to demonstrating commercial production across the border in Québec, Canada. In the US, the Utica underlies the prolific Marcellus shale in portions of Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, West Virginia, and Virginia. The play extends into Canada as well, beneath parts of Lake Ontario, Lake Erie, Ontario, and Québec.

Currently, the majority of mineral leasing for the Utica has been in eastern Ohio and Ontario, Canada, where the play is less than 4,000 ft (1,219 m) below the surface and the Marcellus is not present. In Québec, a concerted effort has been under way since 2008 to validate and commercialize a resource estimated to rank among the top 10 natural gas discoveries in North America.

Following more than 40 years work in Québec that identified the prospectively of the Utica, recent advances in horizontal drilling and hydraulic fracturing technology are helping to unlock the potential of this resource. Actively exploring for natural gas in the St. Lawrence Lowlands, Québec, since the late 1980s, Questerre Energy Corp.has been at the forefront of developing the Utica shale in the province.

In Québec, the pulp and paper industry uses the most water annually; the shale gas industry usessignificantly less. (Chart courtesy of Questerre Energy Corp.)

Utica’s mineralogy is favorable, with a very dry, sweet gas that is basically pipeline quality, according to Michael Binnion, CEO at Questerre. “In Québec, we happen to have a very clean shale. Economically, dry gas could be considered a disadvantage, although from an environmental perspective, it is very beneficial,” he added.

The extensive water resource that made Québec an exporter of hydroelectricity could be its Achilles heel when it comes to developing the Utica. “We’re sitting in one of the biggest freshwater drainage basins in North America,” Binnion said. For thisreason, Utica development is challenged by environmental and public relations concerns.

Economy of scale
The lack of a local oil and gas services industry in the Utica also is hindering further work in the short term. At current gas prices, shale gas is a low-margin business and requires a local service sector to create the necessary economies of scale. To date, many of the services used in Québec are imported from Western Canada, often on a single or multiwell basis. For the Utica to enter full development, a local service industry will have to be created. “That’s where you get into a bit of a chicken-and-egg problem in Québec,” Binnion said.

Without committing to a big enough program (approximately 30 to 50 wells), it is not worthwhile for service companies to set up shop in Québec. “We think to solve this problem, the industry has to get to the point where it has the confidence to commit to those 30 to 50 wells, which is potentially a US $300 million to $500 million commitment,” he added.

Marcellus activity might improve this scenario in the long term with more equipment being used closer to Québec. However, equipment often moves across the border easier than people. “I think when you get an economy of scale, there might be more room to share services with the Marcellus because you’ll get systems to move people back and forth,” Binnion said.

Dispelling myths
More challenging than the lack of a service sector is addressing the public relations concerns about shale gas development. In a province with no history of oil and gas development, myths regarding environmental issues that began in the US have easily pervaded Québec and captured the media’s interest.

Water use in hydraulic fracturing procedures has been a point of contention for many environmental groups. As industry proponents scramble to provide as much information as possible on the facts concerning this technology that has been used for more than 50 years on several thousand natural gas wells, the public relations challenge for many operators is becoming more important.

For example, Binnion recently started his own blog. “I wanted to try to answer directly to people on some of these issues,” he said. There exists a major conflict between two industries right now, namely coal and natural gas. “I think the media loves it,” he added.

Water usage
When compared with other users in the province, the future shale gas industry is expected to be a light industrial user of water. Potential water volumes associated with a 400-well shale gas development program represents 1.5% of the rural water intake in Québec – less than the estimated amount of water used by car washes in the province. Of note, the city of Québec loses six times as much water annually from its municipal water system.

Contamination of groundwater by hydraulic fracturing is yet another myth Questerre has encountered. “It is virtually impossible for fracs to grow 1 to 2 km (0.6 to 1.2 miles) up into the freshwater aquifers, no matter how loud the trucks roar,” Binnion said. “Questerre and its partners currently test water wells in the surrounding area to gather baseline data to confirm they are not affected by the drilling and fracing process.”

Most people do not realize that surface and shallow gas is quite common in Québec and has existed for centuries. Farmers drilling water wells used to encounter shallow gas that would heat their homes.

Reuse, recycle
As the Utica shale moves toward the development phase, the industry in Québec expects to reuse and recycle as much water as possible, with the goal of approaching 100% recycling.

Salt is the primary ingredient of water flowing from Utica completions. In fact, an analysis of the water indicates lower salinity than seawater and minute levels of heavy metals. “The main way we resolve this is by diluting the water with additional makeup water,” Binnion said. “There are no highly radioactive constituents like other shales. We’re just lucky that way.”

Notwithstanding the lack of a local service sector and public perception challenges, Binnion still is enthusiastic about the Utica. With new hydrocarbon legislation, including a regulatory and fiscal framework, 2011 will be an important year in Québec. In light of the issue surrounding shale gas development in New York, how Québec decides to develop this resource through the new legislation will be important not only for Questerre, but for the entire shale gas industry.

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