Even More Gas Processing Plants to Be Built Here
YOUNGSTOWN, Ohio -- The Mahoning Valley is on target to attract at least two more gas processing plants and hundreds of millions of dollars in new investment within the next two years as two midstream companies jockey for position in this part of the Utica shale.
Blue Racer Midstream LLC, a $1.5 billion joint venture between Dominion and Caiman Energy II, plans to develop three new processing plants in Ohio, one slated near the hamlet of Petersburg in southeastern Mahoning County, principals say.
And Pennant Midstream LLC, a partnership between NiSource Midstream and Hilcorp Energy Co., reports that it’s considering adding one, possibly two, natural gas processors along the Hickory Bend project under way in eastern Mahoning County.
“The play is moving north,” remarks Richard D. Moncrief, president and chief operating officer of Caiman Energy and Blue Racer Midstream. “The early stuff was in Carroll County, but we’re starting to see a lot of interest in Mahoning and Trumbull, and even into northwestern Pennsylvania.”
Moncrief, speaking at Hart Energy’s Marcellus-Utica Midstream Conference and Exhibition in Pittsburgh Jan. 30, reported that Blue Racer Midstream plans to add a network of gathering lines in the northern section of the Utica play that includes Trumbull and eastern Mahoning counties.
“We’re going to be adding gathering lines to the north, transport south as we need it, and eventually build a plant,” he said.
The large map Moncrief displayed shows that Blue Racer intends to develop three new processors, one slated for eastern Mahoning County near Petersburg.
That processor – capable of handling at least 200 million cubic feet of gas per day – would connect with new gathering pipelines intended for eastern Mahoning and Trumbull counties in Ohio and Mercer and Crawford counties in western Pennsylvania.
“Mahoning is a good area,” Moncrief told The Business Journal after his presentation. “There’s good access to pipelines and rail facilities you’ll need to have a successful facility.”
This region of northeastern Ohio is fast becoming a focal point for oil and gas exploration, Moncrief adds, noting that much of the data he’s seen indicates the Mahoning Valley stands to become a very productive region for “wet” gas exploration.
“If it’s anywhere close to what we think it’s going to be, you’ll have at least two, maybe three, of these plants in the area,” Moncrief states.
Blue Racer’s plants would hold a processing capacity of at least 200 million cubic feet of gas per day, but Moncrief notes that the joint venture is targeting between 400 million and 600 million cubic feet per day per plant.
Cryogenic plants are used to separate the liquids in natural gas, such as ethane, from dry gas such as methane. The gas is transported through gathering lines from drill sites to these processors, where it’s chilled to 150 degrees below zero and then separated.
The liquid gas is then transported to fractionation plants, where it is further separated into specific products such as ethane, butane or propane. The dry gas is pumped into existing natural gas lines that have been in place for decades in Ohio.
Blue Racer is positioned to invest between $250 million and $300 million this year in the Utica, the COO reports.
The Blue Racer expansion would also tie into hundreds of miles of existing Dominion gas lines that already crisscross the length of the Utica. Aside from the Petersburg site, Blue Racer is planning to construct two other processing plants in the small towns of Berne in Monroe County and Lewis in Harrison County.
Another Dominion cryogenic and fractionation plant in Natrium, W.Va., is under construction, Moncrief adds, and is expected to come online in March. Blue Racer would also transport its gas to other processors, including Momentum/M3 Midtream’s cryogenic plant under construction in Columbiana County near Kensington. “We’ll build some of our own, and also be connected to facilities built by others,” he says.
Dominion has in place about 500 miles of pipeline across the Utica, so Blue Racer can leverage those assets along with the build out to the north, Moncrief reports. “We have unique things that each party brings to the table,” he remarks.
Other energy companies are also assessing potential growth and the opportunity to expand their presence in the northeastern part of the play.
The most prominent is Pennant Midstream, the NiSource/Hilcorp partnership that is developing a $300 million pipeline and processing system that runs along eastern Mahoning County near the Pennsylvania state line.
A large component of the project is the construction of a cryogenic plant at a site at the corner of East Middletown and State Line roads in Springfield Township.
According to records from the Mahoning County auditor’s office, Pennant Midstream purchased 95.5 acres north of East Middletown Road and west of State Line Road for $1,155,120 on Feb. 1 from DEEJ Properties LLC. The auditor’s office listed the market value of the land at $219,560 for tax purposes, and the agent for DEEJ is listed as Diane Johnson of Poland.
“We should have our full gathering system in operation by the end of the year,” reports Jim Avioli, director of business development at NiSource. The system would gather and process gas from producers in Mercer, Lawrence and Beaver counties in western Pennsylvania, and Trumbull, Mahoning, and Columbiana counties in Ohio, he says.
Avioli said that Pennant Midstream plans to install two additional processing plants along the Hickory Bend line, but qualifies that much of this development hinges upon securing commitments from producers drilling in the region.
“We’re working the area to try to get producer commitments,” Avioli says. “We have a second plant lined up that we own, but we haven’t decided where to put it. Right now, we have one producer commitment and one plant committed.”
Oil and gas exploration in the northeastern section of the Utica is moving at a more tempered pace than earlier efforts further south, such as in Carroll or Harrison counties.
Just three wells have been successfully drilled in Mahoning County – all of them owned by CNX Gas, a subsidiary of Consol Energy. Further north, Halcon Energy is drilling the first horizontal well in Trumbull County, in Hartford Township.
Meantime, BP Energy has started preliminary exploration at sites in Gustavus, Johnston and Kinsman townships in Trumbull County.
The lack of data from this part of the Utica reinforces how young the play is, Caiman’s Moncrief observes. “These are huge plays, and we’ve just scratched the surface,” he says. “We’re in Year Two of a 50-year play, so the best is yet to come.”
Still, there are several challenges in the Utica that energy companies must overcome, Moncrief says. First, many producers are concerned about saturation of natural-gas liquids in the market.
“We’re concerned about ethane economics,” he reports, noting that the dry gas haul from the Marcellus shale in Pennsylvania helped depress natural gas prices to their lowest levels in decades. The same could happen with the more profitable wet gas, he cautions.
On the other hand, the infrastructure in the Utica remains woefully inadequate to handle the massive volumes of liquids that the play is expected to yield, Moncrief relates.
“The best thing that could happen is development of the NGL infrastructure,” he says.
The other question is where to transport the liquids gas once it’s processed. More than likely, much of the NGLs moved out of Utica processors would be pumped via pipeline to Mont Belvieu, Texas, a large liquids “cracker” center just east of Houston.
Cracker plants in Mont Belvieu convert liquids-rich gas into specific products – ethylene from ethane, for example – that are used in the petrochemicals industry. These products are then shipped all over the world from the Gulf Coast.
Another issue is that there’s simply not enough demand in the Utica region to absorb all of the ethane, propane and butane the play is expected to produce, adds Darrell Bull, vice president and general manager of Williams Ohio Valley Midstream.
“It looks like there’s going to be about 700,000 barrels of excess coming out of the Utica,” Bull reports. “There’s not enough demand within 500 miles.”
The proposed $4 billion cracker plant under consideration by Royal Dutch Shell near Monaca, Pa., would certainly handle a large quantity of ethane coming out of the Utica, Bull says. But that plant, if built, would not process butane, propane or oil.
That leaves producers and midstream companies with the challenge of getting that excess gas to market, Bull notes. “The thought is to get it to the center of the universe for NGLs – and that’s the Gulf Coast.”
One of the company’s options is to consider constructing a pipeline that leads directly from the heart of the Utica and to the Gulf.
“One of our focuses is to investigate that possibility,” Bull says.
While Caiman Energy’s Moncrief believes there are plenty of liquids to support petrochemical production in the Utica, he doesn’t envision the region evolving into a production center the size and scope of Mont Belvieu.
“We’re working with an area that really isn’t used to having the kind of business associated with fractionation, geo-liquids and petrochemical complexes,” Moncrief says. “That’s a big hurdle that a lot of people have to understand has to be overcome.”
EDITOR'S NOTE: This story first appeared in the Feb. 12th print edition of The Business Journal.
Copyright 2013 by The Business Journal, Youngstown, Ohio.
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