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Sunday, March 2, 2014

Ohio will soon be an energy exporting state

This is the year of the Utica! The national media is aware of the Marcellus Shale in Pennsylvanian, the Eagle Ford in Texas,and the Bakkan in North Dakota. The Utica, while noted in the business press has gone unnoticed in popular media. That is about to change. Presently there are 40 rigs working in Ohio but several sources indicate that number will increase to 60 this year. According to a post at the Ohio Department of Natural Resources has estimated that 1,180 wells will be drilled in the coming year. This comes as Chesapeake Energy, the largest player in the Utica, reported its daily output jumped to 189 million cubic feet during 2013, reflecting a 309 percent increase from from 2012. As good as that may sound the best is yet to come. Chesapeake has drilled 476 well in Ohio, Pennsylvanian, and West Virginia but only has 230 producing while 195 await pipeline construction. This reflects the problem facing the Utica namely a slower than expected infrastructure build out.
Originally the Utica was thought to be a natural gas play. Then it was going to be an oil play. Now it's mixed and while that may be good in the long run it necessitates much unplanned infrastructure. Natural gas coming from the Marcellus has tended to be 97% pure methane meaning that it is pipeline quality that needs no further processing between well head and the consumer's furnace. The Utica has produced oil, natural gas, and natural gas condensates. The oil and gas are separated at the well and the oil can be trucked to Canton or to Catlettsburg, Kentucky but the condensates in the natural gas are more valuable and sold separately so they must be separated at a processing facility. No one plunks down $400 million to build a cryogenic facility until he has good evidence that it will have gas to process. Construction at Utica East Ohio Buckeye Midstream's Kensington plant in Columbiana County took 11 months and it didn't help that in the meantime Blue Racer Midstream’s plant in Natrium, West Virginia went off stream due to a fire. Chesapeake Energy alone forecasts production of 700 million cubic feet per day in 2014 so most likely more processing facilities such as Kensington will be needed and need soon.
So now the natural gas is processed and ready for distribution where does it go? Presently it can only replace out of state gas and be used in Ohio but two transmission lines are planned. Texas Eastern Transmission LP recently announced plans to build a 76 mile, 30 inch pipeline from the Kensington plant to connect with its distribution system. Halfway down in this BizJournal post is the best thing to happen to Ohio since maybe the Wright brothers.
The Ohio Pipeline Energy Network – or Open Project – would mark a change in how natural gas is distributed in the U.S. Typically, gas has flowed from the Gulf Coast and western North America to the eastern part of the nation. But as the Utica play in Ohio and the Marcellus play in Pennsylvania, West Virginia and Ohio continue producing natural gas, projections show Ohio and the Northeast could become net exporters of the fuel.
Then there is NEXUS. Championed by Spectra Energy, the parent company of Texas Eastern, the NEXUS Gas Transmission System will move Utica gas all the way to Ontario. From Spectra's web site;
The NGT project will originate in northeastern Ohio, include approximately 250 miles of large diameter pipe, and be capable of transporting at least one billion cubic feet per day of natural gas. The new line will follow existing utility corridors to an interconnect in Michigan and utilize the existing Vector Pipeline system to reach the Ontario market. It will include interconnects with Michigan Consolidated Gas Company, Consumers Energy and, through the Vector Pipeline, the Enbridge Tecumseh Gas Storage facility and Union Gas’ Dawn Hub, both in Ontario. Additional delivery points across northern Ohio, southeastern Michigan and southwestern Ontario will be added to serve those markets.
As Vice President Biden would say, this is a big (we have standards here) deal! Every BTU of energy used in Ohio will be produced in Ohio and practically every dollar spent by Ohioans to heat their homes will go to the Ohioans who produce it.


  1. John Kasich is not Rick Perry and while i don't think he can queer the deal entirely he has been talking about a severance tax to give the state a share of the action. That is something the state does not deserve. The people of Ohio will pay the tax either in lower wages or more expensive gas.

  2. I'm also wary of Kasich, who has fallen in favor because of his embrace of the Medicaid expansion, the way he did it, and the "bullying" so reflective of the current administration in Washington. You justifies his moves by saying something about standing before God and being able to say you do the right thing and "loved" people. Weren't the Crusades justified that way? Actually you can justify anything that way. Anything. And a promise is a promise. The people of Ohio did not want Obamacare and its kind. We voted on it, but Kasich went around the back door to push through what he wanted.

  3. As I said he is no Rick Perry-not even a Mike Pence.