BP to lease future drilling land in northeast Ohio

[March 28, 2012]  COLUMBUS, Ohio (AP) -- BP has leased 84,000 acres of land in the Utica/Point Pleasant shale formation in northeast Ohio for oil and gas production, the company said Tuesday.

The Utica Shale lies below the Marcellus Shale, where oil companies have drilled thousands of wells in search of natural gas and, more recently, oil.

It was the second big shale-related deal for eastern Ohio this month.

Just two weeks ago, Oklahoma City-based Chesapeake Energy Corp. announced a $900 million project for gathering, compression and processing of natural gas and natural gas liquids. The project will roll out over five years, with parts of the complex scheduled to begin operations by June 2013.

BP signed the latest deal with the Associated Landowners of the Ohio Valley, which represents area mineral owners. Financial terms of the deal weren't disclosed.

"We actually think this has the opportunity to be very good for Ohio, very good for BP," said Tim Harrington, regional president of BP North America Gas, based in Houston. He said the company will sign up leaseholders over the next six months and then appraise how much oil and gas are in the shale. Development will follow.

Harrington said BP was driven to the shale because it offers dry gas and wet gas as well as heavier liquid gas.

"One of the things that we quite like was the potential for the liquids-rich gas opportunity," he said. "We think it has the potential to compete well in our portfolio."

The shale is at a depth of about 6,000 feet. The Ohio Department of Natural Resources estimates there is potential to recover between 1.3 billion and 5.5 billion barrels of oil and between 3.8 trillion and 15.7 trillion cubic feet of natural gas, according to BP.

Harrington said the appraisal process will help determine the economic or take-away potential of the deal.

"This will depend on the nature of the product, how wet, how liquid-based it is," he said. "What we would hope to find is we would have an infrastructure that would build out."

BP seeks to hold both over-mature and young, prospective opportunities, and the move into the Utica Shale is part of that mix, Harrington said. BP now actively drills across Texas, Oklahoma and Arkansas.

Decisions by Chesapeake and BP to develop in Ohio come despite a proposal by Republican Gov. John Kasich to hike the taxes that oil and gas drillers pay for extracting the state's natural resources. Ohio's oil and gas association has criticized Kasich's plan as a potential turnoff to drilling activity. He wants to use the proceeds to fund a modest statewide income-tax reduction beginning in 2016.

An energy bill proposed by Kasich is moving through the Statehouse that updates state regulations in the face of the shale drilling boon.

[Associated Press]

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