Chesapeake eyes OPEN for Utica gas output

OREANDA-NEWS. August 10, 2015. Chesapeake Energy expects to fetch higher Gulf Coast natural gas prices for its Utica shale gas once Spectra Energy's Ohio Pipeline Energy Network (OPEN) project comes online, a Chesapeake executive said.

The Utica shale in Ohio, West Virginia and Pennsylvania is now the fastest growing gas field in the country, as producers recently achieved higher-than-expected results from the first wells drilled in its dry-gas portion. But the Appalachian region's takeaway capacity is already strained by the prolific Marcellus shale, which overlaps the Utica.

Once OPEN is on line, about 85pc of Chesapeake's Utica output will receive Gulf Coast pricing, executive vice-president of the northern division Chris Doyle said. The project will add 531mn cf/d (15mn m?/d) of capacity from the Utica and Marcellus shales to delivery points in Louisiana. It is expected to start in the fourth quarter.

Winter 2016 prices for The Henry Hub in Louisiana are currently averaging \\$3.10/mmBtu, compared with Dominion South prices in the Appalachian region at \\$2.15/mmBtu, according to Argus forward prices.

Chesapeake has had to curtail production in the Utica by 275mn cf/d because of weak regional pricing. The current differential between the regional and the Gulf Coast price is about \\$1.30/mmBtu, or about half of the overall price, Doyle said.

The company will curtail its output for only a few months with a plan to ramp back up in November.

Chesapeake has about 300,000 acres in the dry-gas portion of the shale, and has drilled 18 wells there. The company produced 3 Bcf/d in total during the second quarter, up by 2pc from a year earlier.