Energy companies might have another sweet spot for gas drilling in Pennsylvania.
Royal Dutch Shell on Wednesday said two wells it drilled in the Utica shale below Tioga County are producing at levels comparable to the most successful wells in Southeastern Ohio.
“This opens a new potential for other drillers to follow Shell’s act,” said Tom Gellrich, founder of TopLine Analytics, a manufacturing consultant specializing in shale gas plays.
The energy giant drilled the wells in one of the top-producing Marcellus shale counties, north of Williamsport. But Shell’s Gee and Neal wells are tapping a formation several thousand feet below the better-known Marcellus and were drilled about 100 miles northeast of the closest producing Utica well.
“Last year, we refocused our … strategy to select fewer plays with specific scale and economic characteristics to best suit our portfolio,” Marvin Odum, Shell’s upstream Americas director, said in announcing the well results. “The Appalachian basin is one of those areas, and these two high-pressure wells both exhibit exceptional reservoir quality.”
The success in Tioga underscores Shell’s announcement last month of several land deals aimed at fortifying its position in the state’s northern tier. It swapped drilling rights in Wyoming and Louisiana with Ultra Petroleum for $2.1 billion and 155,000 acres in Tioga and Potter counties. It also sold drilling rights to 200,000 acres in Western Pennsylvania and Ohio to State College-based Rex Energy so it could focus on its more productive properties.
Shell, the 11th-largest producer in Pennsylvania, has drilled the majority of its producing wells in Tioga.
The Utica wells extend about 15,000 feet, including about 4,000 horizontally. Shell put Gee into production last year and Neal in February. It’s awaiting results from four more wells in the county that it expects to begin producing this year.
The Energy Information Administration last month began including Utica results in its monthly shale reports and listed it and the Marcellus as the country’s fastest-growing shale plays.
Companies have focused their Utica drilling on what they call a sweet spot producing a lot of dry gas in Ohio and a swath leading from Washington and Greene counties westward that produces “wet gas,” containing related liquids. Tioga is a dry gas area and is the seventh-highest-producing county in the state.
“It certainly extends the extent of the current play,” said Doug Patchen, head of the Appalachian Oil and Natural Gas Research Consortium at West Virginia University.
“It’s not totally unexpected. Early on, we assigned some potential to the eastern parts of the play,” Patchen said. “We fully expected someone would take a look.”
Gellrich noted that energy companies have followed competitors’ leads in migrating to successful areas during the shale boom that began in Pennsylvania 10 years ago. Whether Shell’s announcement prompts movement of drilling activities could depend on economics, existing infrastructure and where companies hold leasing rights.
Because of the deposits’ depth, drilling a Utica well costs up to twice as much as drilling a Marcellus well. When Downtown-based EQT this summer discussed the risk in its plan to drill its first Utica well in Greene County, senior vice president Steve Schlotterbeck said the experiment “could result in a $15 million dry hole.”
Companies with existing leases, pipelines, water supplies and other operations in that area are most likely to follow Shell’s lead.
“There might be some companies willing to take the risk if they have an established Marcellus location,” Patchen said.
Talisman Energy and Seneca Resources follow Shell with the most gas production in Tioga County, according to the Department of Environmental Protection’s latest reports. Spokesmen for neither company could be reached.
Shell said last year it would divest its Appalachian land holdings while it focuses on other international operations, causing some worry about its proposal to build an ethane cracker, feeding off