The challenge in the western, oily window of the Utica shale play in Ohio is that the reservoir there tends to be normally pressured, according to John Richels, president and chief executive of Devon Energy Corp., which has 235,000 net acres over the Utica as part of a $2.5-billion joint venture with Sinopec Corp.
Hydrocarbons in normally pressured reservoirs don’t flow as easily to the surface as oil and gas that are in an environment that is higher pressured than the surface pressure. And, oil, which is a larger molecule than natural gas, has an even harder time escaping the rock.
So, “the way to get the oil out…, you need to have some permeability,” he told some of the more than 1,600 attendees registered for the IPAA’s 18th annual OGIS New York investment symposium last week.
Permeability is a measure of how easily hydrocarbons can move through rock; porosity is a measure of the size of natural openings in the rock.
“The good news is we are finding a lot of good permeability there,” Richels said.
Devon put its Ohio Utica leasehold in the 1.4-million-net-acre JV with Sinopec along with new-venture leasehold in four other plays in January:
--265,000 net acres over the deep Tuscaloosa Marine shale in southeastern Louisiana and southwestern Mississippi that is at about 11,000 to 15,000 feet and where Richels says the commercial challenge is the well cost;
--350,000 net acres in Michigan that are prospective for Utica shale and A1 carbonate production;
--215,000 net acres in Oklahoma over the shallow Mississippi Lime at about 4,500 to 6,500 feet; and
--320,000 net acres (220,000 in the Powder River Basin and 100,000 in the Denver-Julesburg Basin) over the Niobrara shale in the Rockies.
Why five plays in a single JV? Richels said the total $1.6 billion of drilling costs Sinopec has committed to spend in the JV—Sinopec paid $900 million of the $2.5-billion arrangement in cash upfront—will roll from one play to another as the prospectivity of each is better determined. In the JV, Devon drills the wells, and Sinopec pays a portion of the costs—or a “drilling carry”—to earn a 33% working interest in each.
“We’re going to find hydrocarbons in all of them,” but some may be more economic than others, Richels said in New York.
Some 125 wells will be drilled across the five plays, total, by the end of this year. Possibly, “three of them work and others don’t work as well.” In that case, “we can put all of the (remaining) money (into these) and move the other ones out.”
Recommended Reading
BP’s Kate Thomson Promoted to CFO, Joins Board
2024-02-05 - Before becoming BP’s interim CFO in September 2023, Kate Thomson served as senior vice president of finance for production and operations.
BP Pursues ‘25-by-‘25’ Target to Amp Up LNG Production
2024-02-15 - BP wants to boost its LNG portfolio to 25 mtpa by 2025 under a plan dubbed “25-by-25,” upping its portfolio by 9% compared to 2023, CEO Murray Auchincloss said during the company’s webcast with analysts.
TC Energy Appoints Sean O’Donnell as Executive VP, CFO
2024-04-03 - Prior to joining TC Energy, O’Donnell worked with Quantum Capital Group for 13 years as an operating partner and served on the firm’s investment committee.
Chord Energy Updates Executive Leadership Team
2024-03-07 - Chord Energy announced Michael Lou, Shannon Kinney and Richard Robuck have all been promoted to executive vice president, among other positions.
ConocoPhillips EVP of Strategy, Sustainability, Technology Macklon to Retire
2024-02-16 - Dominic Macklon, who began his career with Conoco in 1991, is set to retire ConocoPhillips May 1.