Gas processing in the mighty Marcellus and über Utica

J. STELL, contributing editor

The gas processing industry in the northeastern US is booming due to rich-gas, shale-sourced plays in the Marcellus and Utica basins. Wet gas production from the region could climb to about 5 billion cubic feet per day (Bcfd) by the end of 2016, according to the US Energy Information Administration (EIA). As recently as 2Q 2013, some industry projections of wet gas production have climbed even higher, the produced gas is even richer and the producers are moving deeper into Ohio and West Virginia.

Maximizing the resource.

By 2016, production of natural gas liquids (NGL) from the Marcellus and Utica shales is expected to reach at least 650,000 barrels per day (bpd), according to the EIA. This would mark all-time production records in a region that has been developing oil and gas reserves for more than 100 years.

The massive growth is good news for gas processing companies and their associated service and supply providers, because much of the gas must be processed to remove NGL before it can meet pipeline specifications. Presently, total gas plant NGL production out of the US Northeast is close to 60,000 bpd. About 55% of the total NGL production of the Appalachian Basin is propane, and 45% is butane and natural gasoline. Through 3Q 2013, propane exports from the US have averaged around 240,000 bpd, pushing a 30% price increase since mid-June.

From the region’s production, approximately 250,000 bpd of ethane is rejected, a portion of which is pushed back into natural gas in the Rockies, Mid-continent and other regions, as a temporary fix. However, six new US ethane crackers are on the drawing board or under discussion, as savvy petrochemical companies reform the US from a net importer of ethylene to a net exporter. New ethane capacity, the majority of which will be built along the Gulf Coast, will ease the glut of ethane coming out of the Marcellus shale play.

Unmarketed sales gas is stored by injection into 380 underground storage systems. Approximately 50% of these sites are located in Illinois, Michigan, Pennsylvania, Ohio and West Virginia.

To take advantage of the boom, gas processing companies with established legacy assets are building new infrastructure to keep up with production, and new entrants into the industry see plenty of running room in the sector. According to recent reports, at least seven new processing plants, 18 plant expansions and 14 fractionators and deethanizers have been announced or planned. Some of the top projects have been announced by experienced companies, and some are by new players to the industry—i.e., Access Midstream, Blue Racer Midstream, MarkWest Energy Partners, Pennent Midstream and Williams Partners.

Meanwhile, Dominion Transmission continues with its plan to build a liquefied natural gas (LNG) export facility to export gas from the Northeast, and Marcellus GTL plans to use Marcellus gas to supply GTL fuels to transportation and heating markets.

Access Midstream.

Access Midstream Partners LP, formed when Chesapeake Energy Corp. sold its share of midstream assets to its partners, is a prominent player in the region. The company recently announced plans to construct a large-scale processing, fractionation and NGL storage facility in the Utica’s wet gas window. The project, named Utica East Ohio Midstream LLC, is owned by Access Midstream (49%), M3 Midstream LLC (30%) and EV Energy Partners (21%). It will include four processing plants with a total capacity of 800 million cubic feet per day (MMcfd); fractionation capacity of 135,000 bpd; approximately 870,000 bbl of NGL storage; and production of propane (450,000 bpd), butane (300,000 bpd) and natural gasoline (120,000 bpd).

In late July, the first phase of the project began service by receiving Utica production, processing NGL and redelivering residue gas to interstate markets. Construction will continue on the second processing and fractionation units, which are scheduled to be completed in December 2013. The joint venture (JV) is the first fully integrated gathering, processing and fractionation complex in eastern Ohio.

Blue Racer Midstream.

Blue Racer Midstream LLC plans to expand the capacity of its newly acquired Natrium natural gas processing and fractionation plant, which processes gas from the Marcellus and Utica plays. The plant has a cryogenic processing capacity of 200 MMcfd and was the first large-scale processing plant to serve rich gas from the Utica shale. The plant includes a 36,000-bpd fractionator, a butane splitter, a 60-mile ethane pipeline, and railway- and truck-loading facilities. Future additions will include barge access.

Blue Racer has already begun construction of its second 200-MMcfd cryogenic processing plant, known as Natrium II, which will bring the facility’s total processing capacity to 400 MMcfd by the end of 1Q 2014. Liquids fractionation capacity at Natrium is 36,000 bpd, but the company plans to increase capacity to 59,000 bpd as drilling activity increases.

MarkWest Energy Partners.

MarkWest Energy Partners LP is the largest processor and fractionator of natural gas in the Appalachian Basin, with fully integrated processing, fractionation, storage, and marketing operations. Its Appalachian assets include the Boldman, Cadiz, Cobb, Kenova, Kermit, and Langley natural gas processing plants; an NGL pipeline; 652 MMcfd of processing capacity; approximately 24,000 bbl of NGL fractionation capacity and 285,000 bbl of storage capacity.

In June, MarkWest’s Cadiz cryogenic gas processing plant at the Cadiz-Harrison County Industrial Park in Ohio was officially up and running. The facility includes multiple plants and a deethanization facility. Heavy NGL will flow via pipeline to a fractionator near Hopedale, Ohio.

Early operations at the processing facility began in mid-May, putting the company on track with its plans for the multimillion-dollar complex. The project was developed by MarkWest and its partner, The Energy and Minerals Group. MarkWest plans to install another plant, with a capacity of 200 MMcfd, next to the first one by 2Q 2014.

Also, in August, the company announced a midstream JV with Kinder Morgan Energy Partners LP to build two new projects in the Utica and Marcellus plays. The first project is the development of a 400-MMcfd cryogenic processing complex in Tuscarawas County, Ohio, utilizing an existing, 220-acre site under option by Kinder Morgan. The second project consists of the development of a 200-thousand-bpd (Mbpd) NGL pipeline to move NGL from MarkWest’s new facilities to the Gulf Coast.

The first 200-MMcfd cryogenic processing plant will be in service by 4Q 2014, while the second 200-MMcfd plant will be in service sometime in 2015. The existing site is expandable to more than 1 Bcfd of processing capacity.

To deliver northern Utica gas to the processing complex, Kinder Morgan will convert a portion of the existing Tennessee Gas Pipeline into rich gas-gathering service, which could begin receiving rich gas by 4Q 2014. Additionally, the JV will construct a new pipeline to deliver NGL produced at the processing complex to its Ohio and Pennsylvania fractionation complexes.

Fig. 1. MarkWest serves producers with its gas processing plant sited next to an existing Columbia Gas Transmission compressor station in Majorsville, West Virginia.

 

Since 2008, MarkWest has invested nearly $1 B to develop midstream infrastructure to support producers operating in the liquids-rich areas of the Marcellus shale play (Fig. 1). Today, the company operates more than 200 miles of natural gas-gathering infrastructure and 625 MMcfd of cryogenic processing capacity.

Pennent Midstream.

The company plans a $300 MM project to build an NGL processing facility and transport natural gas through a new pipeline. Pennant, a JV between NiSource Midstream Services and Hilcorp Energy Co., will build a cryogenic NGL processing plant in Ohio with an initial capacity of 200 MMcfd near Youngstown, Ohio.

Williams Partners.

Williams Partners LP plans a new midstream JV with Shell Oil Co. to install wet gas handling infrastructure and dry gas infrastructure targeting Marcellus and Utica gas production. The new venture, Three Rivers Midstream, will gather and process Shell’s production, and will eventually pursue gathering and processing agreements with other producers in northeastern Ohio and northwestern Pennsylvania.

Three Rivers will construct a 200-MMcfd cryogenic gas processing plant and several related facilities. The processing plant is expected to be in service by 2Q 2015, and will be connected to Shell’s proposed ethylene cracker in Beaver County and the proposed Williams-Boardwalk JV to develop the Bluegrass Pipeline system to move NGL to the Gulf Coast. Williams Partners will initially own Three Rivers Midstream and operate the assets, while Shell has the right to invest capital and increase its ownership prior to mid-2015.

Williams also plans to build a complex known as the Susquehanna Supply Hub in northeastern Pennsylvania. When fully completed, the facility will be a major natural gas supply hub to serve producers in northeastern Pennsylvania. Presently, the system is comprised of a gas gathering inlet capacity of approximately 1 Bcfd and is connected to three major interstate gas pipeline systems. By 2015, Williams Partners expects to be gathering 5 Bcfd in the Marcellus shale.

Dominion Transmission.

Dominion continues to move forward with its project to liquefy natural gas for export at its Cove Point import terminal in Lusby, Maryland’s Chesapeake Bay. The $3 B LNG project, which offers access to Marcellus and Utica production, is planned to begin in 2014, with an in-service date of 2017.

According to Dominion, the capacity of the facility is now fully subscribed with signed, 20-year terminal service agreements. Pacific Summit Energy LLC, a US affiliate of Japanese trading company Sumitomo Corp., and GAIL Global (USA) LNG LLC, a US affiliate of GAIL (India) Ltd., each have contracted for half of the marketed capacity. Sumitomo has an agreement to serve Tokyo Gas Co. and Kansai Electric Power Co. Inc., while GAIL is the largest natural gas processing and distributing company in India.

Dominion acquired Cove Point from Williams Co. in 2002 as an LNG import facility, and began receiving LNG vessels in 2003. In 2009, Dominion finished an expansion that increased Cove Point’s storage and production capacity by nearly 80%. Today, the complex has a storage capacity of 14.6 Bcf and a daily sendout capacity of 1.8 Bcf. The terminal connects, via its own pipeline, to the major Mid-Atlantic gas transmission systems of Transcontinental Gas Pipeline, Columbia Gas Transmission and Dominion Transmission.

Due to production from the Marcellus and Utica shale plays, most US LNG import terminals are operating at much less than nameplate capacity. Dominion, and other companies proposing to build LNG export terminals, believe that exporting US natural gas as LNG will provide better netbacks for producers as well as encourage oil and natural gas drilling.

Marcellus GTL LLC.

In a new direction, a private company plans to spend $200 MM to build a GTL processing plant in Blair County, Pennsylvania. Marcellus GTL LLC will build its Clean Energy Center complex on land that straddles the Allegheny and Blair townships in Pennsylvania.

The Clean Energy Center will use natural gas from the Marcellus shale to produce about 84,000 gallons per day of regular gasoline and propane to be marketed locally as transportation fuel and for heating. The project is based on a two-year development and construction period slated to begin at the end of 2013 and to be completed in 2015. The facility includes a 65-acre site, but the physical plant will only occupy about 10 acres in the center of the site, allowing for a large wooded buffer.

The future of US midstream.

The Marcellus and Utica shale plays continue to provide opportunities for oil and gas development, but processing the gas and moving it to market continues to be challenging for producers. With more gas processing and fractionation capacity on the way—and with more pipelines to move ethane, propane, butane and natural gasoline to markets from the northeastern plays—companies will continue to produce new energy from the region. GP

JEANNIE STELL is an award-winning writer and editor focused on the upstream, midstream and downstream energy industry. Her articles have been published in several languages, referenced in white papers by Microsoft and Iranian National Oil Co., and her photographs have been featured on industry magazine covers and in feature editorials. Ms. Stell is the founder of Energy Ink and can be reached at jstell@energyink.biz.