Thursday -- April 9, 2015

Active rigs:

	4/9/2015	04/09/2014	04/09/2013	04/09/2012	04/09/2011
Active Rigs	91	191	188	209	173

RBN Energy: More On Marcellus Midstream

The fast-growing need for natural gas processing and fractionation capacity in the Marcellus/Utica is creating tremendous opportunities for midstream companies. But determining which assets to develop and when to develop them is complicated by the volatility of hydrocarbon markets, and by the fact that the region has only minimal NGL storage capacity. In today’s blog, we continue our in-depth review of NGL-related infrastructure in the Upper Ohio River Valley with a look at Blue Racer’s existing and planned assets there.

The Utica and Marcellus regions have become a real hot-spot in the natural gas and natural gas liquids (NGL) world in the past four years. As we said in Episode 1 and Episode 2 of our series, natural gas production in Pennsylvania, West Virginia and Ohio now approaches 20 Bcf/d—five times where it stood in 2011. And as interest in the Utica and Marcellus areas west and south of Pittsburgh soared over that same period, gas processing capacity has rocketed too, from 600 MMcf/d to 7.6 Bcf/d. NGL production from those gas plants now exceeds 245 Mb/d, and an ever-increasing amounts of those mixed or “y-grade” NGLs are being fractionated locally into ethane and other NGL purity products. In Episode 3 we started our deep dive into the Marcellus/Utica’s midstream infrastructure with a discussion of the eight major pipelines that move natural gas through and out of the region; and in Episode 4 and Episode 5 we considered the gas processing plants, de-ethanizers and C3+ fractionation facilities MarkWest has been developing. (For more on what de-ethanizers, C3+ plants and fractionators do, see Episode 5.) Then, last time in Episode 6, we described the ethane and C3+/Y-grade pipeline interconnections between MarkWest’s eight (and soon nine) gas/NGL complexes in southwestern Pennsylvania, northern West Virginia and eastern Ohio, and their links to third-party pipelines that take NGLs out of the region. We also explained how the elements of MarkWest’s “machine” work together to ensure smooth operation, even in the event of NGL-takeaway disruptions that could otherwise be very troublesome in a region without much NGL storage capacity to take up the slack. The fact that we devoted three blogs to describing MarkWest’s gas processing, fractionation and NGL pipeline assets reflects the company’s unquestioned big-dog status in the Marcellus/Utica midstream sector.

But there is a lot more important midstream development going on in the Marcellus/Utica. A major player in the region concentrating primarily on the Utica is Blue Racer Midstream. The company is a joint venture of Caiman Energy II and Dominion formed in December 2012 to own, operate, develop and acquire midstream assets in the Utica Shale and certain adjacent areas in the Marcellus Shale. As part of the formation of the company, Dominion contributed most of its gathering and processing assets in the region, including Dominion East Ohio’s existing rich gas gathering network, other portions of its gathering system, Dominion’s Natrium Extraction Plant and a Dominion Transmission pipeline connecting Natrium to the Dominion East Ohio gathering system. Blue Racer (named for a fast-moving snake found in the Midwest) calls its interconnected network in the region the “Super System,” and can use this system to gather and process natural gas, fractionate NGLs and deliver residue gas and purity NGL products to multiple locations. Blue Racer’s aim is to both provide that end-market optionality and—through the connectivity between its facilities—to give its producer customers a high degree of operational reliability, even if an NGL takeaway pipeline is shut down unexpectedly. Let’s run through Blue Racer’s assets in the region using RBN’s new Pipeline GIS map-building system.