Eagle Ford gas processors welcome growth opportunities in 2014

J. STELL, Contributing Editor

Now that upstream oil and gas producers have “cracked the code” of South Texas’ Eagle Ford oil and gas play, gas processing and petrochemical operators, suppliers and service companies are ramping up their offices and capabilities in the area.

Inarguably, the Eagle Ford shale play is creating a business boom for gas processing operators and service supply companies in Texas. The prolific play, named for the town of Eagle Ford—where the surface of the formation can be seen as clay soil—stretches from Leon County in the northeastern part of the state, to Webb County in the southwest, and continues into Mexico.

The Eagle Ford play made headlines in 2008 when Petrohawk Energy Corp.—which was later acquired by BHP Billiton for $12 billion (B)—discovered the Hawkville field in La Salle county. Since then, the play has been delineated to encompass approximately 22 active fields in 30 counties. It is at least 50 miles (mi) wide and 400 mi long, and boasts an average thickness of 250 feet (ft). The fairway, or “sweet spot,” of the play is concentrated in the 14 centermost counties. The Cretaceous-aged play lies between the Austin Chalk and the Buda limestone formation, at approximately 4,000 ft to 12,000 ft deep.

By November 2013, Eagle Ford oil production was nearing 700 thousand barrels per day (Mbpd). Also, condensate production measured at the wellhead surpassed 200 Mbpd, and gas production topped 3.8 B cubic feet per day (Bcfd), lending credence to the rumor that the play could reach 1 million (MM) high-margin barrel (bbl) by mid-year 2014 (Figs. 1–4). As the play continues to be developed, gas processing operators are stepping up to the plate to move valuable gas and NGL to market.

Fig. 1. The Eagle Ford shale play of South Texas includes 22 active fields spread across 30 counties, and is now concentrated in the 14 centermost counties. Source: Railroad Commission of Texas.

Fig. 2. Drilling permits for oil and gas producers working in the Eagle Ford shale increased from 26 in 2008 to more than 4,000 by 2012. In 2013, permit requests tapered off as upstream operators began to focus their efforts in the fairway of the play.

Fig. 3. Oil production from the Eagle Ford shale has increasedfrom 352 bpd in 2008 to more than 636 Kbpd in 2013.

Fig. 4. Natural gas production from the Eagle Ford shale has increased from 2 MMcfd in 2008 to more than 3 Bcfd in 2013.

More than $800 MM was spent in gas processing plant construction in La Salle, Karnes, DeWitt and Bee counties in 2012, according to a study by the University of Texas at San Antonio’s Institute for Economic Development. Plans for further development are underway. The report estimates that about $100 B in manufacturing, refining and processing expansions are planned as the Texas Gulf Coast prepares to use more oil and gas from the Eagle Ford play and other US shale fields.

For gas processors, the Eagle Ford shale represents estimated recoverable reserves of approximately 150 trillion cubic feet of natural gas with high condensate and NGL, making it one of the highest-quality plays in the US. The status and project progress of major operators in the Eagle Ford formation are discussed here.

Anadarko Petroleum Corp., along with joint venture (JV) partner Western Gas Partners LP, began operations in June 2013 at the $100 MM Brasada gas processing plant just south of Cotulla in La Salle County. The facility processes approximately 200 MMcfd of natural gas from Anadarko’s Eagle Ford wells.

At present, the plant separates wet gas into methane, ethane, propane and butane only from Anadarko’s wells in Dimmit, La Salle, Maverick and Webb counties, but the site is large enough to accommodate a 400-MMcfd expansion for processing third-party gas. From the plant, NGL moves via pipelines to another plant in Yoakum and to fractionation facilities in Mont Belvieu, Texas. Some production also heads south to Corpus Christi, Texas, where it can be used in refining or transferred into a network of interstate pipelines.

Atlas Pipeline Partners LP acquired Teak Midstream LLC for $1 B in 2013, gaining an interest in the 200-MMcfd Silver Oak cryogenic gas processing plant in the heart of the liquids-rich Eagle Ford play, along with 265 mi of gas gathering and residue delivery pipelines. The company plans to install the Silver Oak II, a second 200-MMcfd cryogenic plant, which is expected to be operational in the first quarter of 2014.

Boardwalk Pipeline Partners LP plans to spend approximately $180 MM to add 150 MMcfd of gas processing capacity to its Flag City plant near Edna, Texas, and an additional 55 mi of 20-inch (in.) and 24-in. pipelines to its existing 340-mi gathering system.

Boardwalk’s anchor shippers include Statoil ASA and Talisman Energy Inc., a partnership that cuts through the core gas condensate window in DeWitt, Karnes, La Salle, Live Oak and McMullen counties.

Chevron Phillips Chemical Co. recently completed an expansion of the NGL fractionation unit at its Sweeny plant in Old Ocean, Texas. The project increased capacity by approximately 22,000 Kbpd, or about 19%, to nearly 140 Mbpd, to take advantage of additional production from the Eagle Ford and Permian basins.

Meanwhile, Phillips 66 will develop a 100-Mbpd NGL fractionator in Old Ocean, close to the company’s Sweeny refinery. Construction is expected to begin in the first half of 2014, with startup expected by the second half of 2015. NGL feedstock for the Old Ocean fractionator project will arrive via several pipelines that will avoid the Mont Belvieu congestion, and NGL products will be sent to petrochemical customers.

DCP Midstream LLC is building a 200-MMcfd cryogenic processing plant near Goliad, Texas, in partnership with DCP Midstream Partners LP. The plant is scheduled to be completed in early 2014. It will be the seventh plant owned by DCP in South Texas, and it is the third plant to be constructed during the company’s flurry of buildouts in 2013. Its two other new plants include the 200-MMcfd Eagle plant and the 200-MMcfd Pettus plant.

Energy Transfer Partners LP and its JV partner, Regency Energy Partners LP, completed construction of their second NGL fractionator in Mont Belvieu ahead of schedule, and are pumping out ethane, butane and propane. The two facilities have a combined fractionation capacity of 200 Mbpd and were “a $210 MM response to booming production in the Permian and Eagle Ford,” according to the companies.

The JV plans to export butane and other products to international markets as production at the fractionators grows, and a third fractionator in Mont Belvieu could be in the works. Also, Energy Transfer is partnering with Sunoco Logistics Partners to build a Gulf Coast liquefied petroleum gas export terminal, with operations expected to begin in early 2015.

Enterprise Products Partners LP began operations at its seventh NGL fractionator at Mont Belvieu in September 2013. The new facility fractionates up to 85 Mbpd of NGL, increasing Enterprise’s total fractionation capacity at Mont Belvieu to 570 Mbpd.

The company plans to build an eighth fractionator that should be in service by early 2014. This unit will raise total capacity at the Mont Belvieu complex to 655 Mbpd and increase Enterprise’s total fractionation capacity to more than 1 MM bpd. Fractionators 7 and 8 are being developed as part of a JV with Western Gas Partners LP.

Howard Energy Midstream Partners LP is constructing its 200-MMcfd Reveille cryogenic plant in Webb county to process liquids-rich production from the Eagle Ford, Olmos and Escondido formations in South Texas. Complementary to this plant will be the Falcon NGL pipeline, which will transport approximately 18 Mbpd of NGL to an interconnection with Enterprise’s Eagle Ford NGL pipeline. The Reveille processing plant and the Falcon NGL pipeline are expected to be completed in early 2014.

Kinder Morgan Energy Partners plans several major Eagle Ford JVs and projects that could reach almost $900 MM in expenditures. In 2013, the company acquired Copano Energy LLC for $5 B, gaining that company’s nine processing plants and other assets. A 400-MMcfd expansion is planned for Kinder Morgan’s Houston Central plant in Colorado county, Texas, which now includes 700 MMcfd of cryogenic processing capacity and 22 Mbpd of fractionation capacity.

TexStar Midstream Services LP plans to build a 300-MMcfd cryogenic processing plant near Pettus, Texas. The project will include direct access to Corpus Christi through TexStar’s 70-Mbpd, 56-mi, Y-grade NGL pipeline, and access to Mont Belvieu through DCP Midstream LP’s Sand Hills pipeline. Presently, TexStar owns and operates the 300-MMcfd Lone Star processing plant, which is designed to handle liquids-rich Eagle Ford gas. The Pettus cryogenic plant is expected to be operating by early 2014.

Formosa Plastics is joining the gas processing industry in the effort to take advantage of Eagle Ford opportunities. In November 2013, Formosa Plastics announced its intention to expand its plans to build an ethane cracker unit and a downstream derivatives facility to put Eagle Ford NGL to good use. The $2 B expansion of Formosa’s Texas operations is bigger than that previously planned by Formosa Plastics as of February 2012, when it said it would spend $1.7 B to build two factories and a polyethylene plastics plant in Texas.

Dow Chemical Co. plans a new, world-scale propylene production facility that will use Eagle Ford NGL as low-cost feedstock. Basic engineering work is underway, and the project is on track for production startup in 2015.

Service and supply companies. Meanwhile, in September 2013, Halliburton opened a new, 150-acre, 400,000-ft² facility in southern Bexar county, near the Eagle Ford operations area. The center includes a 10,000-ft² state-of-the-art laboratory and a real-time operations center, a 112,000-ft² truck maintenance shop, a wireline and perforating facility, a mud plant and a double-sided cement bulk plant.

In August 2013, Baker Hughes reported plans to build a $30 MM operations center and administrative headquarters in southeast Bexar County to support drilling in the Eagle Ford shale. The company said the center, to be built on 64 acres near Interstate 37 and US 181, eventually will employ 400.

Weatherford International, Schlumberger, Valerus and other major service and supply companies have also moved into the area to capture opportunities during the play’s development. The full extent of the buildouts indicates that the Eagle Ford shale will continue to be a profitable area for development for the foreseeable future. GP

Fig. 5. Condensate production from the Eagle Ford shale has increased from a mere 229 bpd in 2008 to more than 176 Mbpd in 2013.