Business Development Opportunities in the Utica Shale Play in Consideration of the Geographic Alignment of the Fairway Defining Business Opportunities within a Geographic Footprint Jim Scherrer, Energy Resources Director Geologic Analysis November 2015 The purpose of this document is to highlight the current business development opportunities that arise across the breadth of the Utica Shale fairway. The oil and gas resources underlying the Marcellus from within the “Utica Shale” play have become better defined through the shale resource exploration and recovery operations of various exploration and production (E&P) Above: The “tiramisu model” companies. The geographic alignment is unique and now is provides a visualization of the better defined; offering opportunities for business horizontal drilling taking place in development that aligns with the geography of the fairway. shale repositories worldwide. Additionally, boundaries such as the “Line of Death” for economic quantities of oil and gas within the play have been better delineated. More recent test drilling within the Appalachian Basin below the Marcellus (Devonian Period), in stratigraphy generally known as the “Utica” (Ordovician Period), there has been a resurgence of activity as this carbon-rich play has yielded unexpected, very positive results. This Utica formation assessment also includes the Point Pleasant formation. Taury Smith (NY State Geological Survey) says the Utica Shale play is more appropriately called the “Utica Shale and associated organic‐rich calcareous shale and interbedded limestone and shale play.” This report relies on many sources, but primarily the Utica Shale Appalachian Basin Exploration Consortium (the Consortium). The 15 members of the Consortium were joined by individuals from four state geological surveys, two universities, one consulting company, the U.S. Geological Survey (USGS) and the Department of Energy’s (DOE) National Energy Technology Laboratory (NETL), who collectively comprised the Research Team members of the Consortium. http://www.wvgs.wvnet.edu/utica/playbook/pb_consortium.aspx 1 Utica Is Bigger Than Many Thought The Utica Shale play could hold far more oil and gas than previously estimated, the US Department of Energy’s Fossil Energy Office (FOE) said this week (10/15/2015). If the play’s commercial potential could be realized, it could be, geographically, the nation’s largest gas field. FOE said the two-year study, which West Virginia University led with financial support from DOE’s National Energy Technology Laboratories (NETL) and 14 industry members of the Utica Shale Appalachian Basin Exploration Consortium, estimates the Utica holds technically recoverable volumes of nearly 2 billion barrels (BBbls) of crude oil and 782 trillion cubic feet (Tcf) of gas. The results, which build upon previous estimates, far exceed the US Geological Survey’s 2012 assessment and highlight new potential for the Utica shale, FOE said. Background The Appalachian Oil and Natural Gas Research Consortium has led the way recently in definition of the resource play called the Utica Shale. They describe the play as neither “Utica” nor “shale” as it focuses on both the Utica and the Upper Point Pleasant formations; as interbedded limestone and organic-rich shale. Further, West Virginia University (WVU) is committed to expanding education, research and outreach on technical aspects of shale gas development and has a focus on innovations in system-wide control using operational and economic data to allow companies to be profitable in a competitive market. This appears to be the first consortium to consider research on economically recoverable oil and gas from the play which would publish reports on their findings. The “play book” incorporates and integrates results of research conducted at various granularities, ranging from basin-scale stratigraphy and architecture to the creation of nanoporosity as gas was generated from organic matter in the reservoir. Between these two end members, the research team has mapped the thickness and distribution of the Utica and Point Pleasant formations using well logs; determined favorable reservoir facies through an examination of outcrops, cores and samples at the macroscopic and microscopic scales; identified the source of the total organic carbon (TOC) component in the shales and estimated the maturation level of the TOC; and searched for reservoir porosity utilizing scanning electron microscopy (SEM) technology. The Study built on and continues what was learned when AONGRC compiled the Trenton-Black River Play Book. That study examined the stratigraphic interval from the base of the Black River up through the Trenton Limestone and the stratigraphically-equivalent Lexington Limestone. However, it also included an examination of the upper Trenton time-equivalent Point Pleasant Formation that was deposited in a shallow depocenter located between the Trenton Platform to the north, extending from what is now Indiana to New York, and the Lexington Platform to the south, in what is now Kentucky, southwestern West Virginia and western Virginia. 2 Doing Business in the Utica Shale Business development opportunities within the upstream, mid-stream and downstream supply chain exist over nearly the entire Utica Shale play, with the exception of the “immature” and the “over mature” regions found on the western and eastern boundaries, respectively. The “north south” alignment of the oil-, wet gas-, and dry gas- fields offer unique business development opportunities in each of the up-, mid- and down-stream business markets. Some unique opportunities could include: Up-stream Water supply, treatment, retention Rig Support Services Hydrofracturing Mid-stream Field Work Staffing services Pipe, conduit, trenching Down-stream Gas to electric plants Gas used in micro applications Broad ranges of utility applications three The figure below shows that the Conodont alteration is likely to hold for quite some time. 3 The forces which created the coal seams that are abundant on the eastern region have “baked out” the free oil and gas. Geologists and gas companies know the area directly around the Lackawanna Syncline (the banana- shaped formation that runs through Luzerne and Lackawanna counties), where the bulk of the region’s famous anthracite is found, is likely to be unproductive because the high temperatures and pressure that hardened the coal also drove the gas out of the carbon-rich shale. Additionally, the under-maturation of the formation on the western front limits development to mid- Ohio. New York boundaries are constrained by the “fracking moratorium”, while southern boundaries are delineated by the Appalachian mountain range. The Utica Details Near the end of Trenton time, while relatively clean carbonates were being deposited on the platforms, a mixture of clastic muds and carbonates was being deposited in the intra-platform basin, creating the Logana Shale Member of the Lexington/Trenton Formation, and the younger Point Pleasant Formation above the Lexington/Trenton, which was succeeded by deposition of the darker, but not necessarily more organic-rich Utica Shale. The Utica Shale was deposited in the upper Ordovician Period (covers the time between 485 and 444 million years ago). It is below the Marcellus of Devonian period (covers the time period between 410 million years ago to 354 million years ago) and separated by the Silurian Period (440 - 410 million years ago) in between. It is above the Trenton Limestone, and often includes the Point Pleasant formation. An in-depth study in Eastern Ohio and Western Pennsylvania found the following (from Abstract): ”Approximately 500 well logs and three cores from eastern Ohio, western Pennsylvania, and northern West Virginia are used to construct a depositional model of the Utica Shale and associated Upper Ordovician strata. Previous studies of outcrop data from the Cincinnati arch and Jessamine dome recognized a number of Late Mohawkian to Early Cincinnatian third-order sequences deposited in an active foreland basin during onset of the Taconic orogeny. Sequences consist of deepening upward successions of transgressive limestone and shale, recording a period of sustained subsidence and increasing sea-level along the eastern margin of North America. The transition from a carbonate dominated system to a clastic dominated system reflects the collapse and drowning of a widespread carbonate platform. The Trenton/Lexington Limestone through Utica Shale comprise the transgressive systems tract (TST) of a large second-order sequence, superimposed with four, smaller scale third-order composite sequences. Third order sequences are regionally correlative, aggradational, and lack low-stand deposits. Sequences are separated by type 3 sequence boundaries that amalgamate with transgressive surfaces and separate underlying highstand system tracts (HST’s) from overlying TST’s. 4 Chronostratigraphic surfaces demonstrate that basinal interbedded lime mudstone, shale, and marl facies of the Logana and Point Pleasant formations are contemporaneous and genetically related to platform limestone on the flanking Trenton and Lexington platforms. Isopach thickness maps of composite sequences indicate significant accumulation of carbonate sediment and build-up of the platforms during the Late Mohawkian, followed by increased clastic sedimentation and basin fill in the cross-strike Sebree trough and Point Pleasant subbasin during the Early Cincinnatian.” http://www.searchanddiscovery.com/documents/2012/50613mcclain/ndx_mcclain.pdf