Former NiSource Executives Form Century Midstream
YOUNGSTOWN, Ohio -- A newly formed company that builds midstream assets for the oil and gas industry believes the Utica shale in eastern Ohio holds enormous potential for the long term. And it wants to be front and center when activity accelerates in the underdeveloped liquid-rich regions of the play.
“There are several big players who haven’t chosen what path to take,” says Joe Blount, CEO of Century Midstream LLC. “There’s opportunity to come.”
Century Midstream is a Houston-based company formed June 12 by former executives of NiSource Midstream.The startup is backed with a $550 million vote of confidence by its capital partner, First Reserve Partners, a 30-year-old company in Texas that describes itself as the largest global private equity firm focused exclusively on energy.
While at NiSource, these executives helped forge a partnership with Hilcorp to form Pennant Midstream LLC and build the $300 million Hickory Bend project, a gas gathering and processing system that extends from Mercer County in western Pennsylvania through Mahoning County and into Columbiana County.
“This is the team that got the Pennant transaction done, and we’re looking to replicate that,” Blount tells The Business Journal. “The goal is to build a long-term, sustainable business. We’re open to a lot of different transactions.”
Century Midstream enters the oil and gas industry as other midstream companies are jockeying for position to capture what they believe is the next phase of business in the northern areas of the Utica play.
On Aug. 7, MarkWest Energy Partners LP of Denver and Kinder Morgan Energy Partners LP of Houston announced a $1 billion midstream joint venture that includes construction of a cryogenic processing complex in Tuscarawas County and a natural gas liquids pipeline to transport these liquids to fractionation plants on the Gulf Coast.
That same day, executives from Bluegrass Pipeline LLC, a joint venture between Williams of Tulsa and Boardwalk Pipeline Partners LP of Houston, met with area residents to explain plans to build a 1,200-mile transmission line that would also pump liquids-rich gas from the Utica and Marcellus plays to the Gulf Coast for processing.
Midstream infrastructure – that is, pipelines, compressor stations, processing and fractionation plants – are essential to energy companies that want to extract and market the potential trillions of cubic feet of gas and liquids in the Utica.
Heavy hitters such as Chesapeake Energy Corp., Exxon-Mobil, Royal Dutch Shell, BP America, Consol Energy Corp., Gulfport Energy Corp., Hilcorp Energy Co. and Halcon Energy Resources, are actively drilling in the Utica, a rock formation that stretches from northwestern Pennsylvania and angles through eastern Ohio.
Gulfport, Chesapeake and Hilcorp have struck processing agreements with existing midstream companies, investing billions of dollars in infrastructure along the spine of the Utica play.
Utica East Ohio Midstream recently ramped up the first phase of operations at its cryogenic plant in Kensington in southern Columbiana County. Utica East is a partnership between M3 Midstream, EV Energy Partners and Access Midstream. The first sales from the complex took place July 28, the company announced.
The Kensington plant separates dry gas from natural gas liquids and then sends the wet gas to a fractionation plant in Harrison County. There, the liquid gas is processed into products that can be converted into butane, propane or ethane.
Meanwhile, work continues on Pennant’s $150 million cryogenic plant along State Line Road in Springfield Township and is scheduled for completion by the end of this year.
Two principals of the newly formed Century Midstream – Brian Raber and Jim Avioli – were in the Mahoning Valley early this month talking with officials, says Blount, the CEO.
“We have a $500 million commitment, and we have the financial capability and experience in the basin,” he says. “We want to revisit the Utica and Marcellus, and take a look at other basins in the United States.”
While Century is interested in pursuing joint ventures in this market, Blount says, there are other opportunities to handle products that could emerge.
“As products come out of fractionators, there is a local market,” he relates. “But as more drilling takes place, a lot of that product goes elsewhere. So there could be opportunity through rail transportation. There’s going to be more of that provided by midstream companies.”
Finding the right mix and fit is the key to success in the Utica, especially for young companies such as Century, Blount notes. “It takes a lot of homework, and we’re confident we’ll get there.”
The newly announced MarkWest/Kinder Morgan processing complex would serve wells producing in Mahoning, Columbiana, Trumbull and Carroll counties and target the northern region of the play. MarkWest recently finished the first phase of a huge cryogenic and fractionation complex in Harrison County in the southeastern section of the Utica, part of a $1 billion processing and gathering system that has started processing gas from nearby wells drilled by Gulfport.
MarkWest’s Tuscarawas project extends its reach across the Utica, noted Frank Semple, president and CEO. “The JV processing complex expands our footprint into northern Ohio and complements our existing full-service midstream infrastructure in Ohio, West Virginia and Pennsylvania,” he said in a statement.
Gas in the northern tier of the Utica would be delivered through a 26-inch pipeline owned by Tennessee Gas Pipeline Co. to the processing plant that would be converted to handle the gathering of rich gases. Liquid gases such as ethane would be separated from dry gas, such as methane, through a cooling process at the Tuscarawas site. The wet gas would then be transported from the plant to the Gulf Coast via a 900-mile Tennessee line.
“The combination of Kinder Morgan’s strategically located and existing pipeline assets that traverse through the heart of the Utica and Marcellus shale plays, along with MarkWest’s existing and significant footprint, should provide significant growth opportunities,” Richard D. Kinder, chairman and CEO of Kinder Morgan, said in a prepared statement.
The pipeline is initially slated to handle 200,000 barrels per day, but that could expand to 400,000 barrels as processing in the Utica expands.
Two cryogenic plants are planned for the 220-acre site in Tuscarawas County, each capable of handling 220 million cubic feet of natural gas per day. The first phase is expected to come online during the fourth quarter of 2014, the second phase shortly after that, the companies said.
It would be the sixth such processing complex in Ohio since energy companies began exploring the Utica more than two years ago.
Other midstream ventures in development are also targeting the northern section of the Utica in Ohio, which includes the Mahoning Valley, and Mercer and Lawrence counties in Pennsylvania.
“There’s going to be many, many jobs for the new construction part of this project,” says Sara Delgado, spokeswoman for Bluegrass Pipeline LLC.
The Bluegrass project, a joint venture between Williams and Boardwalk Pipeline, includes 550 miles of new construction of pipe that would begin in Mercer County, move south through Lawrence County and enter Ohio at the southeast corner of Mahoning County. The line would then run south to Kentucky, where it would join in with an existing pipeline headed to the Gulf Coast.
The pipeline would collect natural gas liquids produced in the Utica and Marcellus and ship them directly to Louisiana and processors on the Gulf Coast. There, the gas is converted into products such as ethylene, which is a base ingredient for plastics.
Delgado says more than 6,000 construction jobs would likely be required for the new build-out. “That also translates into many ancillary services that are needed in the area,” she
adds.
Company representatives toured areas of Ohio and Pennsylvania last week, explaining the project to landowners in the path of the proposed pipeline.
“We started in April trying to obtain survey permission from landowners who are interested in working with us,” says Rob Hawksworth, manager of land and GIS permits for Williams. “Within the next 30 days or so, we plan to start talking to landowners about acquiring easements.”
Hawksworth reports that the project would like to wrap up the permitting process by the end of 2014 so construction could begin by late that year or early 2015. Bluegrass officials have said that it should have the pipeline commissioned by the end of 2015.
Delgado noted that the volume of natural gas and natural gas liquids is projected to be so great that it will open a vast number of business opportunities for new midstream ventures in all portions of the Utica.
“There will be plenty for all regions,” she says.
EDITOR'S NOTE: This story appears in our MidAugust 2013 print edition.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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