A Landowner’s Guide to Condensate in the Utica Shale

You may have heard buzz about “condensate”. What it is, how is it different from natural gas and crude oil, and why might it be good news for Ohio landowners? 

In recent years, Ohio’s Utica Shale has seen a significant increase in condensate production. For people who may not have extensive knowledge about the oil and gas industry, the term “condensate” can be a head-scratcher. In this post, we’ll answer some common questions Ohio landowners might have about condensate.

 

1. What is condensate, and how is it different from natural gas or crude oil?

While most of us have a basic understanding of what gas and oil are, condensate can be a bit trickier to define. Reuters once headlined an article “U.S. oil industry’s billion-dollar question: What is condensate?” about the challenge of making sense of what exactly distinguishes a condensate.

For the purposes of this post, we’ll keep things simple. In places like the Utica Shale, condensate is a liquid that’s found along with natural gas. It’s different from natural gas and crude oil in several ways:

• What it’s made of – Natural gas, crude oil, and condensate are all composed of different compounds. Natural gas is mostly made up of methane. Crude oil is made of a mixture of hydrocarbons, many of them “heavy” (high density). Condensate is made from lighter hydrocarbons. 
• What it looks like – Natural gas is like the air all around us—it’s a clear substance with no fixed size or shape. Crude oil is a liquid, usually black or dark brown in appearance. Condensate is a liquid too, but it’s often colorless, yellow, or light brown. Condensate is also typically thinner than crude oil, which is thicker and heavier.
• Where it comes from & how it’s extracted – Both crude oil and natural gas are extracted from underground reservoirs where they are formed. Condensate is a little different though. In shale formations like the Utica, condensate emerges from natural gas under certain temperature and pressure conditions. The two forms are extracted together and separated by operators at the surface.  

 

2. Is condensate more or less valuable than natural gas and crude oil?

Condensate is typically not sold for as high a price as crude oil, but it often commands a higher price than natural gas. Like gas and oil, the price of condensate at any given time depends on a variety of factors—such as where it is produced, its characteristics and quality, and market demand. In recent years, the price of condensate has gone up as demand has increased.

The global market for condensate continues to grow due to its diverse applications. Condensate is commonly used for:

• Petrochemical production – The lighter hydrocarbons in condensate can be used to produce a wide range of products, including plastics, synthetic rubber, chemicals, and various industrial materials.
• Liquid fuel production – Condensate can be processed to create gasoline, diesel, and aviation fuels.
• Blending with crude oil – Condensate can be blended with heavier crude oils to improve their flow, allowing oils that are too thick to be transported through pipelines. 

 

3. Where in Ohio’s Utica Shale play is condensate typically found?

Counties with notable condensate production include Carroll County, Harrison County, Belmont County, Guernsey County, Jefferson County, and Monroe County. According to the Ohio Department of Natural Resources, Belmont, Carroll, Guernsey, Harrison, Jefferson, and Monroe produced a combined 26.5 million barrels of condensate in 2022. This represents over 70% of the total condensate production in Ohio.

Historically, areas producing the most condensate were located on the eastern edge of the state. However, within the past couple years, exploration and production (E&P) companies have experienced success with condensate production further westward in the Utica Shale. Some great condensate production has been happening in places like Western Carroll County and Northern Guernsey County. Areas like Tuscarawas County, which has seen minimal drilling over the past decade, could start to see more development as the westward expansion continues.  

The distribution of dry gas wells versus condensate wells in the Utica Shale is influenced by geological factors. In most cases, as with both crude oil and natural gas, operators will develop areas where they are seeing the best production.

 

4. Have energy companies made condensate more of a priority in Ohio?

Yes. In the past few years E&P companies have improved their drilling techniques and technologies for condensate production in shale formations like the Utica Shale. These improvements have increased hydrocarbon recovery rates.

As a result, given the development and production we’re seeing right now, it’s likely we’ll see more drilling for condensate in Ohio in the coming years. Of course, as with anything in the energy industry, the future of condensate drilling in the Utica will depend on market conditions, regulatory factors, and economic considerations. 

 

5. Why is the increase in condensate production exciting for Ohio landowners?

The growth in condensate production is good for landowners for a few reasons: 

• Overall economic benefits – On a large scale, more rigs at work and productive wells in the area means more investment in the state from E&P companies—which can stimulate local economies, enhance property values, and improve quality of life.
• Increased value of mineral rights – For landowners who have leased or are considering leasing their mineral rights, the increase in condensate production can make your mineral rights more valuable—which means you’ll be able to negotiate a better lease deal with an E&P company. Likewise, if you’re considering selling your mineral rights and you live in the wet gas window, your asset may be more valuable now than it was just a few years ago.     
• Increased royalty payments – For landowners already receiving mineral royalties, increased production in your area could mean higher royalty payments. And if you are interested in selling your mineral royalties for an upfront payment, you may receive more favorable offers from buyers if you are living in the condensate window.

Condensate production in the Utica Shale play presents a shift in the state’s oil and gas landscape. Landowners stand to benefit in several ways. Whether you’re currently receiving royalties or considering leasing your mineral rights, the expansion in condensate production could have a meaningful impact on your financial situation. 

 

Still have questions or want to know how condensate development could impact the value of your mineral rights or royalties? Reach out to Gateway Royalty today.