UPDATE 2-Dominion in Utica Shale natgas services deal

Source: Reuters

Dominion Resources Inc has entered into a natural gas gathering service agreement in the Utica Shale in Ohio, and continues to negotiate with producers for other agreements, a sign of growing interest in infrastructure to recover the area’s rich oil and gas resources.

Its subsidiary Dominion East Ohio entered into a long-term agreement with M3 Ohio Gathering (Momentum), a partner in the Utica East Ohio Midstream LLC joint venture, that includes Chesapeake Midstream Development, a subsidiary of Chesapeake Energy Corp, and EV Energy Partners.

Dominion will gather 180 million cubic feet per day of gas from wells committed to M3 Ohio and transport it to the Kensington Processing Plant, presently under construction by Utica East Ohio Midstream.

Chesapeake in March announced plans to build a large natural gas processing hub in eastern Ohio.

The Kensington plant aims to process up to 800 million cubic feet per day of gas and the bulk of supplies will be delivered into Kinder Morgan Energy Partners Tennessee Gas Pipeline.

Dominion will use existing pipeline assets with limited capital upgrades needed to support the project, Dominion Chief Executive Thomas Farrell said during the company’s third quarter conference call on Thursday.

The project is due to come online in early 2014.

“Development of the Utica shale formation is proceeding, as demonstrated by the leading indicators of announced well permits and drilling activity,” he said.

The Ohio Department of Natural Resources, through early October, had issued 413 horizontal well permits to multiple producers with 176 wells drilled to date and 35 of those wells now producing. Twenty-four rigs are currently on location in Ohio, Farrell said during the call.

The Utica Shale lies under the Marcellus Shale, which are both part of the Appalachian Basin, the “longest producing petroleum province in the United States,” according to the U.S. Geological Survey (USGS).

The basins are thick with horizontal rock formations that hold substantial reserves of wet and dry gas trapped between the layers.

The Utica Shale contains about 38 trillion cubic feet of technically recoverable natural gas, the USGS said earlier this month.

Gas producers have descended on the area to recoup what they expect to be hundreds of billions of dollars from developing the resources.