Cyrogenic Processing Plant Takes Shape in Kensington
KENSINGTON, Ohio -- Piece by piece, the central nervous system of oil and gas production in the Utica shale is starting to fall into place as construction on the Utica East Ohio massive cryogenic plant in Columbiana County moves forward at a rapid clip.
“We’re a little over halfway finished with the first phase,” reports Baron John, construction coordinator for the UEO Kensington project in Hanover Township in southern Columbiana County. “We’re keeping on schedule and want to commission sections of the plant so we can get gas flowing.”
The Kensington plant is part of a $900 million investment by Utica East Ohio – a partnership formed by M3 Midstream, Access Midstream and EV Energy Partners. Utica East is developing the cryogenic plant in Kensington and a fractionation plant 50 miles south in Scio in Harrison County. Both plants are to be connected with a large-diameter pipeline, forming the backbone of the system.
Meantime gathering lines constructed by Access Midstream are being connected to wells under development by a joint venture of Chesapeake Energy Corp., Total SA and EnerVest Energy.
With more than 280 wells drilled in this region, energy production companies that have invested billions of dollars in developing the Utica are eagerly awaiting the commission of the Kensington plant and others like it. Without these plants, production of natural gas liquids – hence sales and profits – are restricted.
“The wet gas from these wells has to have somewhere to go,” John says. “The focus of this plant is to extract the liquids from the dry gas.”
Three phases, or “trains,” are planned for Kensington. Each phase of the plant will be able to process 200 million cubic feet of natural gas. Gas flows from the wells via a spider web of gathering pipelines into larger lines that feed the plant.
The gas is pumped into a large tower that chills the gas to 150 degrees below zero, causing the heavier molecules to sink to the bottom and liquefy, while the lighter dry gas – usually methane – remains at the top of the tower. Each train will be equipped with a cooling tower.
Methane is then redistributed through existing natural-gas pipelines, such as those lines owned by Tennessee Gas and Dominion, John says. The liquefied gas would be pumped to the Harrison County fractionation plant.
There, the liquid gas is to be further processed into specific products such as butane, ethane or propane, John adds.
John reports the first phase should be finished and operational by early June. “Right now, we’re fully ramped up in the construction phase,” he says, gesturing to an extensive steel skeleton and a 100-foot tower that’s risen from what just a year ago was 170 acres of pristine farmland.
Between 300 and 350 workers are onsite, John says. Subcontractors from the local labor pool are working on the plant, while other contractors hired from elsewhere across Ohio and out-of-state are being used for the project, he says. “The main contractors have subbed a lot of work out.”
Power for the new plant would be fed through an Ohio Edison substation also under construction at the site, which would provide electricity for the plant’s 5,000-horsepower compressors.
“We’re using electrical power for compression at this plant because it eliminates emissions problems that we would have if we burned fuel,” John says. The decision to use electricity also greatly reduces the noise.
Many of the components are prefabricated offsite. Still, the project has sourced material from suppliers in the state. For example, Pioneer Pipe/Viking Fabricators Inc., based in Marietta, supplied the structural steel for the project, and Exterran’s new plant in Youngstown is likely to supply additional components as the project continues.
John, a native of New Zealand, has spent more than 30 years in the industry and not that long ago was working in the San Juan basin in southwestern Colorado. He says compression and processing systems such as this one will unlock the full potential of the Utica. “Without plants like these, the field won’t have anywhere to feed the gas,” he says.
And the Utica is expected to have lots of gas. Geological studies estimate that the Utica may hold about 15 trillion cubic feet of natural gas. But what’s most attractive about the Utica – a rock formation about 8,000 feet below eastern Ohio and parts of western Pennsylvania – is that it contains not just dry gas, but natural gas liquids as well, and an oil window in the western edge of play.
“A lot of us are working as fast and fierce as we can to get our plants up and running,” says George Francisco, executive vice president of M3 Midstream. “Once that’s done, wells can flow at unrestricted rates, so we’ll see more of what the play entails.”
In addition to the UEO project, Denver-based MarkWest Energy Partners is constructing a $500 million processing system in Harrison County in the southern portion of the play. And in Mahoning County, Pennant Midstream – a partnership between Hilcorp and NiSource Midstream – is building a cryogenic processor in New Springfield as part of its $300 million Hickory Bend system.
Meantime, Blue Racer Midstream, a partnership composed of Dominion East Ohio and Caiman Energy II, is planning a processing plant in Petersburg, in southeastern Mahoning County.
“The backlog of wells gets higher every day,” M3 Midstream’s Francisco says. “The drilling is out in front of the processing, which is a bit unusual. We expect our plants to fill up pretty quickly based on the backlog of these wells.”
According to data from the Ohio Department of Natural Resources, 81 horizontal wells are now producing in the Utica, 596 permits have been issued, and 293 wells are drilled.
During a conference call with analysts April 1, Chesapeake acting CEO and chief operating officer Steve Dixon said his company has just 54 wells in production out of the 250 it’s drilled since 2010. Production stands at about 75 million cubic feet a day from those 54 wells.
Dixon reported those wells could nearly double in capacity once UEO’s processing plants come online. As more wells are hooked into the pipeline, production is estimated to boost flow rates to 330 million cubic feet a day out of Chesapeake’s Utica wells by the end of this year, he said.
“We have close to 900,000 dedicated acres to our system in the Utica,” M3’s Francisco notes.
Access Midstream, a newly formed company that purchased Chesapeake’s midstream assets last year, is building the gathering lines that link Chesapeake wells with the Kensington plant, Francisco says. “The gas that will flow into Kensington are from wells located in Harrison, Carroll, and southern Columbiana County,” he reports.
Gas gathered from future wells in Mahoning and Stark counties could be transported on the Blue Racer system and linked into the Kensington plant, Francisco adds. “We’ve acquired 180 million cubic feet a day on the Blue Racer line.”
Aside from the wet gas window, the Utica has an ample supply of dry gas that doesn’t require fractionation, Francisco says. While it’s now more profitable to drill for natural gas liquids, the price of dry gas is slowly improving. “It’s closer to $4 per mcf [thousand cubic feet], and $4.50 to $5 would be a game-changer,” he says.
Early projections of the Utica’s potential show that natural-gas production is greater than the amount of processing capacity planned for the play. “It’s projected by some to be two billion to three billion cubic feet per day,” Francisco says. “Clearly, we need the planned processing facilities to come online.”
The Kensington plant at full capacity can handle 600 million cubic feet a day, while another UEO plant planned for Leesville, Ohio, in southwest Carroll County, could add more capacity by the end of 2014, Francisco reports. “We expect our system to grow over time to, we hope, one billion cubic feet per day,” he says.
That leaves another one billion to two billion cubic feet of future Utica production capacity available for processing. The MarkWest plant is slated to handle another 600 million cubic feet a day, while the Pennant Midstream project is designed for 200 million cubic feet per day. The Blue Racer project is also likely to add more processing capacity.
“You’re going to need all of that,” projects Francisco, “and a bit more.”
Copyright 2013 The Business Journal, Youngstown, Ohio.
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