You Took a Condensate Shipped to Sea? – Prospects for Ohio Crude Exports

The condensate potential of the Utica shale play in northeast Ohio continues to be talked up by producers drilling for oil there. Natural gas output in the Utica is doing pretty well on its own of course – part of the Appalachian Tsunami of production that includes the Marcellus play. Condensate in the Utica is still considerably less exciting with production topping out at 25 Mb/d in 2013 but fifty percent higher now (37 Mb/d in August 2014 according to the Energy Information Administration - EIA) as more processing infrastructure releases production from completed wells. Today we ponder prospects for shipping Utica production overseas.

The Ohio Department of Natural Resources (ODNR) has historically been slow to release production numbers for the State’s oil and gas wells. This year they required horizontal well owners to report quarterly production, but the data is still released a couple of months after the end of the quarter.  However, EIA included Utica production data for the first time in their August 2014 monthly drilling productivity report  (see Higher and Higher for more on the report content) so the data available going forward will be far timelier. Although EIA and ODNR only report oil and gas numbers, oil production from the Utica is assumed to be mostly condensate, since drilling is concentrated in the so called “lean condensate” window of the Ohio Utica play (see the blue dashed circle in Figure #1). Producers have been most successful in achieving high initial production rates of hydrocarbon liquids (including condensates) from the Point Pleasant shale in northeast Ohio (see Utica Oil or Bust?).



Surviving the Flood of Light Crude Oil

Why are refineries limited in the portion of light crude that can be run?  What are the current limits on light crude runs?  If U.S. refineries cannot absorb all this volume and it cannot be exported, where will all this light crude go?  These questions and many more will be addressed at this conference, to be held today and tomorrow in Houston.  More Information Here.

EIA historical data provided with their first Utica drilling productivity forecast shows that Utica oil/condensate production more than doubled in 2013 from 10 Mb/d to 25 Mb/d as new processing capacity came online that released pent up production from already completed wells. According to EIA production will reach 40 Mb/d by September 2014.  Bentek is currently forecasting growth to 220 Mb/d over the next 5 years to 2019. Keep in mind here that although Utica production is growing, these volumes pale in comparison to Bakken or Eagle Ford shale growth since 2011 – the Utica is still a start-up play. But given the current buzz about condensate exports we wondered whether at least some of that Utica production might eventually work its way to overseas markets? As we described in our recent blog on the Department of Commerce, Bureau of Industry and Security (BIS) process to approve exports (see CCATS Scratch Fever) getting the OK to ship condensate overseas simply requires BIS certification that condensate is a suitably refined product. Once the BIS are OK with the processing, then a producer or shipper would need to demonstrate that their condensate was segregated from other hydrocarbons that were not so processed on its journey to the Port of export. 

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