Corrected: US players mull ways to bring Marcellus Shale ethane to market

19 October 2010 19:10  [Source: ICIS news]

A map of the Marcellus shaleCorrection: In the ICIS story headlined “US players mull ways to bring Marcellus Shale ethane to market” dated 19 October 2010, please read in the eighth paragraph 75,000-125,000 bbl/day instead of 65m bbl/day. A corrected story follows.

By Sheena Martin

HOUSTON (ICIS)--Production companies with drilling leases in the Marcellus Shale have heard at least five proposals for moving excess ethane out of the US northeast to a viable market, an analyst said on Tuesday.

A large region of the Marcellus Shale has high concentrations of ethane. Because the northeast lacks the infrastructure and market for ethane, producers have been considering projects to ship product out of the region.

The front-runners are looking at shipping product to Canada and the US Gulf via pipeline, truck and ship.

Each option has some merits and some disadvantages,” said Ron Gist, senior analyst for Purvin & Gertz. “Eventually one of the projects will probably become the preferred choice. We doubt that more than one or perhaps two options will be built.”

Until the projects are built, some of the ethane can be used to generate power for running gas compressors, said Anne Keller, president of Midstream Energy Group. In addition, gas with a large amount of ethane can be blended with coalbed methane - which has a much lower heat index - and still meet pipeline requirements.

But these options do not consume enough ethane to keep up with the shale drilling and the extraction rates. The proposed projects for moving ethane add up to more than $1bn (€710m) in investments.

Likely the cheapest project proposed, NOVA Chemical and Buckeye have teamed up to construct a pipeline for shipping ethane and other natural gas liquids (NGLs) to Sarnia, Canada, for underground storage and for use in existing petrochemical facilities. 

The pipeline could take 75,000-125,000 bbl/day of ethane and some normal butane, alleviating the need to move summer normal butane by rail.

Another company, El Paso, has looked at taking the ethane to Louisiana using an existing gas line and building a piece on each end, connecting the Marcellus Shale and Louisiana ethane grid.

The proposed Marcellus Ethane Pipeline System (MEPS) could move 60,000 bbl/day of ethane from the shale to interconnect with third-party ethane pipelines. The project has a targeted in-service date of April 2013.

Mark West Liberty and Sunoco have proposed using a new pipeline and ships to move the ethane to viable markets.

The project is expected to have an initial capacity for transporting up to 50,000 bbl/day of ethane to the US Gulf coast as soon as the second quarter of 2012. The project could be expanded to handle additional ethane production.

In the project, Mark West Liberty would add facilities to its processing and fractionation complex in Houston, Pennsylvania, which would separate the ethane for delivery to downstream facilities.

A 45-mile (72 km) pipeline would connect the Mark West Houston complex in Pennsylvania to an existing Sunoco pipeline at Delmont, Pennsylvania. That pipeline would take the ethane to an east coast Sunoco facility that could store the ethane.

At this facility, Sunoco would build refrigerated ethane storage facilities to keep the product in a liquid state. Ethane has to be kept at about -200 degrees Fahrenheit (-93 degrees Celsius) to keep it liquid.

Ships could then transport the ethane to Gulf coast.

Keller said there are questions with this project about whether the existing Sunoco pipe could handle the pressure of the ethane, and what the ultimate price for the ethane would be since shipping it is so expensive.

Under another proposal, a joint venture created by Williams and Dominion would connect the Rockies Express pipeline in eastern Ohio to the Williams Transco Station 195 in southeastern Pennsylvania. The so-called Keystone Connector would stretch 240 miles and ship up to 1bn cubic feet/day.

The companies have planned to work with potential shippers to determine the level of interest in this project.

Also, Cumberland Plateau Pipeline plans to develop a 1,000-mile NGL pipeline that would originate in the Marcellus Shale and deliver NGLs to the end-use markets in the Louisiana Gulf coast.

One proposal off the table is an ethylene cracker in the east coast, an analyst said.

“We do not believe that building a new ethylene plant in the east coast region is a viable option,” said Gist, the senior analyst. “Thus, if ethane is extracted from some of the gas in the Marcellus Shale gas play, it will have to be shipped to other regions.”

($1 = €0.71)

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By: Sheena Martin
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