BP Enters Shale Game

WARREN, Ohio – Global oil giant BP has entered the Utica Shale play, which means that five of the world’s seven largest publicly traded energy companies soon will be drilling in the local region.

The potential treasures of oil and natural gas liquids continue drawing major players to Ohio’s Utica Shale formation, as BP leased 84,000 acres in Trumbull County last week.

“Over the last five years BP has been America’s largest energy investor with vast experience in developing natural gas resources. We intend to bring our expertise and the highest industry safety and environmental management practices to this project,” said Lamar McKay, chairman and president of BP America.

Calling Ohio’s Utica Shale a “relatively new and very promising shale basin that consists of a potentially significant liquids-rich gas source,” BP signed a lease with Associated Landowners of the Ohio Valley (ALOV), a group representing some eastern Ohio mineral owners.

BP is the second largest oil and gas producer in the U.S. with a work force of about 23,000 people, making it the country’s second largest oil and gas employer. The deal allows BP to become the fifth of the so-called “super majors,” consisting of six of the seven largest publicly-traded oil companies in the world, to play the Utica and Marcellus shale game in Ohio and West Virginia. These companies are Exxon Mobil, BP, Royal Dutch Shell, Chevron, ConocoPhillips and Total SA.

Public records show Exxon has at least 52,334 acres leased for drilling in Belmont and Monroe counties, while competitor Chevron has several thousand acres leased in Marshall and Ohio counties. Exxon Mobil subsidiary XTO Energy plans to drill the company’s first Ohio Utica Shale well just south of the former Key Ridge Elementary School in Belmont County, state records show. Chevron took over several thousand acres of originally leased by AB Resources or Tri-Energy.

Shell is scheduled to build a multibillion-dollar ethane cracker in Monaca, Pa., while the company also maintains some natural gas assets in north-central West Virginia. Total recently announced a $2.32 billion partnership with Chesapeake Energy to develop 619,000 liquids-rich acres in eastern Ohio.

To this point, only ConocoPhillips has yet to enter the Marcellus and Utica shale plays.

PetroChina recently surpassed Exxon Mobil as the world’s largest publicly traded oil company. However, the Chinese government owns 86 percent of the company’s stock.

Through its heritage companies Standard Oil of Ohio (SOHIO) and Amoco, BP’s roots in Ohio date back to 1870. BP operates the BP-Husky refinery near Toledo which it owns in a joint venture with Husky LLC, and is also a leading marketer of fuels in Ohio through independently-owned marketers under the BP brand.

“BP is excited to expand our presence in Ohio in a way that will create jobs, bolster the local economy and provide additional sources of energy from an important emerging American resource,” McKay added.

“We are very encouraged by what we have seen of the Utica/Point Pleasant formation,” said Tim Harrington, regional president for BP’s North America Gas business. The Point Pleasant formation is one that is geologically close to the Utica, with both shales being at an estimated depth of about 6,000 feet.

“Our focus in 2012 will be to better understand the geology and devise a plan to safely develop the resource,” he added.

The Ohio Department of Natural Resources estimates a recoverable Utica shale potential between 1.3 and 5.5 billion barrels of oil and between 3.8 and 15.7 trillion cubic feet of natural gas.

“BP is committed to hiring and purchasing locally whenever possible and we anticipate having a positive impact on the region while providing a new source of energy for America,” added Harrington.

Operating across a vast U.S. geography that stretches from onshore U.S. Gulf Coast through the Rocky Mountains, BP’s North America Gas business has one of the best portfolios in the industry with a presence in seven of the leading U.S. onshore basins.