InterviewUS Chesapeake mulls options for shale infrastructure

14 October 2011 17:44  [Source: ICIS news]

By Sheena Martin

HOUSTON (ICIS)--The infrastructure needs of northeast US shale basins opens opportunities for investment and downstream integration to the petrochemical industry, an executive of a natural gas production and infrastructure company said on Friday.

“This gives [our] midstream an opportunity to look at further downstream investment opportunities, whether it be in gas processing, fractionation or even [natural gas liquid] NGL pipeline opportunities,” said Mike Stice, president of Chesapeake Midstream.

Chesapeake Energy is the second largest natural gas producer in the US, following ExxonMobil. The company is looking at infrastructure in the Marcellus shale in West Virginia and Pennsylvania and the Utica shale in Ohio.

Rich natural gas saturated with ethane from the Marcellus shale cannot be transported through existing northeast US pipelines because of its high pressure, unless a waiver is given. There were also no fractionation or gas processing facilities until recently.

Chesapeake Energy processes its rich natural gas through MarkWest’s facility in the Victory area of Pennsylvania.

Similarly, the Utica shale basin lacks gas processing facilities or transportation means.

Stice also addressed the infrastructure issue on 3 October at the InfoCast Marcellus Infrastructure Finance and Development Summit.

“Long term, as Utica development takes place and further development of the southeast Marcellus, we’re going to need additional processing ability,” Stice said at the summit.“There’s obviously going to be room to exploit the existing incumbent capacity, but there will likely be our own midstream infrastructure built as well.”

Stice said it was too early in the development of the Utica to comment further on the company’s plan for infrastructure development.

In the US northeast, Stice said there is a local market for much of the NGLs. For efficiency, Chesapeake infrastructure plans would intersect with existing local transportation of NGLs, whether its truck or rail.

“When we think in terms of who’s going to provide [infrastructure], we first look to the incumbents or the people in the area with a footprint on the ground that could incrementally provide the service,” Stice said. This includes Dominion, Caiman Energy and MarkWest.

“This play is going to be large enough, whether it be the Utica or the southeast Marcellus, that we’ll need more infrastructure other than what the original incumbents could provide. We’ll be looking to participate ... in all those pieces of the value chain,” Stice said.

Development of infrastructure could happen in as little as three to five years, but it will take seven to 10 years to have a complete value chain in place for the region, Stice said.

By: Sheena Martin
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