The Next "Oil" Miracle Will Be In Ohio!

Source: Decline of the Empire

News reports have surfaced lately that the next oil production miracle will be in … Ohio! Steve Hargreaves’ Ohio set to see oil boom thanks to fracking  is typical.

NEW YORK (CNNMoney) — Ohio hasn’t been an oil powerhouse for nearly 100 years.

But thanks to controversial new drilling technology, the state that once produced a third of the nation’s crude and was the birthplace of John D. Rockefeller’s mighty Standard Oil could once again be a significant source of domestic supply.

… the new production, which is coming from a layer of previously untapped shale rock deep beneath the state, relies on hydraulic fracturing and horizontal drilling.

If given the proper development, Ohio could be producing 200,000 barrels of crude a day by 2020.

That’s not going to rival Texas’ current output of 1.4 million barrels a day and is just a small part of the nation’s overall crude output of 5.6 million barrels per day, according to the U.S. Energy Information Administration.

But based on current production rates it would be enough to make Ohio the sixth-largest oil producing state in the country and put it ahead of such heavyweights as Louisiana and Wyoming.

Hargreaves goes on to focus on the environmental issues surrounding fracking, but I was more interested in this 200,000 barrels of crude, which standardly abbeviates crude oil, we are supposed to get by 2020. And what was this previously untapped shale rock lying deep beneath the state?

Your intrepid reporter did a little research. That deep shale layer turns out to be the Utica Shale. We get the crucial details from geology.com.

What is the Utica Shale?

The Utica Shale is a rock unit located a few thousand feet below the Marcellus Shale. It also has the potential to become an enormous natural gas resource. The Utica Shale is thicker than the Marcellus, it is more geographically extensive and it has already proven its ability to support commercial production.

It is impossible to say at this time how large the Utica Shale resource might be because it has not been thoroughly evaluated and little public information is available about its organic content, the thickness of organic-rich intervals and how it will respond to horizontal drilling and hydraulic fracturing. However, the results of early testing indicate that the Utica Shale will be a very significant resource.

That’s Ohio on the far left right next to Pennsylvania.

Hang on! Wait a minute! Didn’t geology.com just say the Utica has the potential to become an enormous natural gas resource? Where’s the crude oil? The next thing you know Newt Gingrich or some other sociopath will start prattling on about how we can achieve energy independence in the United States, so we better nip this story in the bud.

Utica Shale in Eastern Ohio

During 2011 most of the drilling activity in the Utica shale was occurring in eastern Ohio. This geographic area attracted interest for a variety of reasons which include: 1) the Utica Shale is only a few to several thousand feet below the surface; 2) lease prices had not yet been driven up to competitive levels; and, 3) early wells drilled into the Utica Shale were yielding significant amounts of natural gas liquids – which can significantly increase the value of a well. During 2011 natural gas companies spent billions of dollars acquiring Utica Shale acreage in eastern Ohio.

And then, curiously, the article contains this sentence.

The Utica Shale is proving to be rich in oil and natural gas liquids.

That is the only reference to “oil” in the entire article. But didn’t Steve Hargreaves refer to 200,000 barrels per day of crude coming from eastern Ohio? My experience with reporting on oil is that few people know what they’re talking about. The word “oil” can mean just about anything to them—natural gas liquids, ethanol, biodiesel, palm oil, canola oil, Diet Coke^®, Gatorade^®, whatever. So here’s a simple rule to follow when you read about so-called “oil”.

Crude Oil liquids are not the same as Natural Gas Liquids

Propane and butane are natural gas liquids. These liquids are used predominantly as inputs for the petrochemicals industry. Crude oil is refined to make diesel, gasoline and other products.

Definition — Components of natural gas that are liquid at surface in field facilities or in gas-processing plants. Natural gas liquids can be classified according to their vapor pressures as low (condensate), intermediate (natural gasoline) and high (liquefied petroleum gas) vapor pressure.

Natural gas liquids include propane, butane, pentane, hexane and heptane, but not methane and ethane, since these hydrocarbons need refrigeration to be liquefied. The term is commonly abbreviated as NGL.

I’m not going to turn my nose up at butane or natural gasoline, which are used for gasoline blending at refineries, and of course propane can be used for home heating. However, these liquids are not as energy dense as crude oil, and our transportation system doesn’t depend on them.

As if all this weren’t bad enough, there’s another land rush in Eastern Ohio as companies vie to snap up drilling rights! The Wall Street Journal reported on the situation in Utica Shale Energizes Deal Frenzy in Ohio (September 27, 2011).

While the 170,000-square-mile Utica Shale sprawls beneath parts of eight states and Canada, energy companies and analysts believe the richest reserves of oil and valuable natural-gas liquids, such as propane and butane, lie in eastern Ohio.‬

There’s that word “oil” again. Sigh.

In recent weeks the buzz around the area has intensified. Large producers’ moves into the area are becoming public. This month has seen big acquisitions. And stock analysts are recommending shares of small companies with Ohio acreage.

Last week, Exxon Mobil Corp. confirmed it is snapping up drilling rights in the Utica Shale. Exxon won’t say how much land it has locked up or where the property lies. But the move caught Wall Street analysts’ attention.

And Chesapeake Energy Corp., the country’s second-largest natural-gas producer, after Exxon, is shopping a stake in its 1.25 million eastern Ohio acres that analysts say could set a new price baseline. Chesapeake Chief Executive Aubrey McClendon has said it may have a joint venture signed as early as next month.

Deeply buried energy-bearing rocks, shales in recent years have touched off acquisition frenzies as pioneering firms cash in on their discoveries and sell out to, or partner with, larger firms with the cash to extract oil and natural gas.

It’s another frenzy! So now we’ve got the same nonsense going on in the Utica play we saw in the Marcellus play. Life’s too short to get into that subject today, but I’ll tell you this—if America was truly bursting at the seams with “energy bearing rocks,” you wouldn’t see an acquisition frenzy in the Utica shale of Eastern Ohio, which is likely to be a moderately sized natural gas play.

So if you hear Newt Gingrich or some other politician tell you Eastern Ohio is going to lead us out of Energy Darkness within which we currently reside, you’ll know better. And remember, 200,000 barrels of whatever it turns out to be (oil equivalent) is merely a drop in the proverbial bucket.

Read more at Decline of the Empire