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Oil and gas leasing booms in Trumbull
warren
Oil and gas leasing in Trumbull County has exploded since the start of 2012 including significant investments by BP and Chesapeake Energy.
There have been 11,101 lease agreements in Trumbull County in the first six months of 2012, an increase of 8,360 from the first six months of 2011, said Diana Marchese, Trumbull County recorder.
“The number of leases are just amazing,” she said, adding she has not heard any specific reason for the increased interest.
“At one time, I attended a ALOV [Associated Landowners of the Ohio Valley] meeting, and we were told there was no interest in the northern part of Trumbull County,” she said. “Now the information being put forth is the exact opposite.”
During the past month, Marchese’s office had the largest transfer of leases in the county’s history. Chesapeake Energy filed 7,000 oil and gas leases representing 28,000 acres to the recorder’s office June 26. The majority were transferred from Everflow Eastern of Canfield to Chesapeake.
Everflow Eastern’s leases originally were purchased to conduct vertical drilling, Marchese said.
BP’s investment included a smaller number of leases, but more acreage in the county. It included 1,000 landowners in the county involving 84,000 acres of mineral rights with bonus payments of more than $330 million.
Since the purchase, BP has continued to run ads seeking people interested in leasing mineral rights in several counties including Trumbull.
Recently, BP has focused on assets that contain large volumes of high-value crude oil and natural-gas liquids such as propane, butane, pentane, hexane and heptane. Abundant natural resources, free market policies, technological innovation and a skilled work force make Ohio attractive for development, said Curtis Thomas, director of government and public affairs for BP.
“BP is always evaluating opportunities for investment onshore in the U.S. As we looked at the subsurface potential and opportunity to enter new areas, the Utica/ Point Pleasant shale play ranked high in our evaluation,” he said.
BP has a project team in Ohio to appraise resources. In the coming months, the company expects to acquire seismic surveys, prepare a development plan and survey land for initial wells to be drilled next year, Thomas said.
“We are in the very early stages of evaluating this area, but the Ohio Department of Natural Resources estimates a recoverable shale potential of as much as 5.5 billion barrels of oil and 15.7 trillion cubic feet of natural gas,” he said. “We will be doing this in accordance with environmental best practices and keeping the communities informed along the way.”
The expansion into Trumbull County is the natural progression of the industry, combined with areas inside the shale that are expected to produce oil or gas, said Peter Mackenzie, a geologist and vice president of operations for the Ohio Oil and Gas Association. The geology is designed to reduce risk.
“The geology will only take you so far,” he said. “You don’t truly know until you drill.”
The companies involved in oil and gas exploration do a lot of work to minimize the risk. They typically have a pretty good idea of what they expect to find before buying leases, Mackenzie said.
Recent activity must have something to do with testing that has been done that shows Trumbull County has good potential, particularly for oil and heavier, wet gases such as propane or butane, which has more value than dry gases, said Eric Planey, vice-president of international business attraction for the Youngstown/Warren Regional Chamber.
“I question what does the geology look like,” he said. “The ODNR maps look good, but as they always say, you never really know until you start drilling.”
Another advantage for Trumbull County is it has rural areas with large chunks of land available for leasing combined with good highway access in all directions, Planey said.
Speculation in Mahoning County has not seen as much leasing due to population density, he said.
“These companies seem to like to drill in more open, rural areas,” Planey said.
Trumbull County has far fewer residents per square mile with 340.1 versus 580.2 in Mahoning County, according to U.S. Census data.
Trumbull has been in the state’s projections of areas with potential for both Utica and Marcellus shale development potential.
The state’s geologic maps for the Utica Shale have not changed recently, said Heidi Hetzel-Evans, media relations manager for the Ohio Department of Natural Resources.
“Companies may have more up to date information,” she said.
The office hears all the time that Ohio remains in the exploratory stage of oil and gas development, Hetzel-Evans said.
Companies are still out there looking for the “sweet spots” that will have the best production, she said.
“Anecdotally companies have been moving to the west and north from their previous areas of focus,” Hetzel-Evans said.
Chesapeake declined to comment on the company’s purchase of mineral rights leases from Everflow Eastern or the company’s interest in Trumbull County.