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Shale drilling in Ohio, neighboring states could support three large ethane cracker plants

JACKSON TWP. — Ohio’s Utica shale is generating enough liquid ethane to support several processing plants that can carry a price tag of several billion dollars.

That assessment came Tuesday from Cleveland State University economist Iryna Lendel, a speaker at the daylong Utica Summit II at Kent State University’s Stark Campus.

At least four of the so-called cracker plants that turn ethane into ethylene, a key ingredient in making plastic, have been proposed in Ohio, West Virginia and western Pennsylvania.

Natural gas wells in the Utica and Marcellus shale formations in those three states are producing enough ethane to support three large cracker plants, said Lendel, whose comments were based on a preliminary economic assessment of the Utica Shale. The report is expected to be completed by December.

About 60 percent of the liquids derived from Utica wells are ethane, she said.

Cracker plants cost from $1 billion to $7 billion, depending on size. It probably will take five to seven years before the first plant opens in the Appalachian Basin, Lendel said.

Pipelines also have been proposed to carry ethane to the Gulf Coast for processing and to the East Coast for export.

Lendel also said it appears that Utica drilling in Ohio will continue for at least another 10 years and perhaps 20 to 30 years.

To date, drillers in eastern Ohio have drilled about 116,000 acres, or only 3.3 percent of the 3.5 million acres above the Utica shale.

Related: Utica shale gas production continues to grow

She estimated that the number of wells being drilled in Ohio could reach 850 a year, if the number of drilling rigs is increased slightly.

Ohio, she said, is “at the very beginning of Utica development. What you are seeing is just a hint of what we have.”

Ohio has permitted 1,534 Utica shale wells, of which 1,102 have been drilled and 584 are in production.

In other news, Lendel, in one of the first estimates of the production drop in the Utica shale, said production in Utica wells declined about 65 percent in the first 12 months. That drop is similar to what drillers have experienced in Marcellus shale in Pennsylvania, she said.

There is not enough data from the second, third or fourth years of production to draw additional conclusions, she said.

Lendel said Ohio needs an additional $30 billion in pipelines and processing facilities, and it will take another two to four years to get that work done.

Another speaker at the forum, Rayola Dougher, senior economic adviser for the American Petroleum Institute, called the sudden spike in natural gas and oil production in Ohio from the Utica shale in 2013 “unprecedented.”

Tom Gellrich, of Pennsylvania-based TopLine Analytics, said the U.S. shale boom already is making a big impact on chemical companies and plastic makers.

Natural gas prices dropped by two-thirds in the U.S. from 2008-2012 but remained steady in other parts of the world, he said. That means that shale gas has given U.S. industries a major advantage, he said.

Bob Downing can be reached at 330-996-3745 or bdowning@thebeaconjournal.com.

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