Extra ethane poses obstacle in US Marcellus Shale development

By Sheena Martin

HOUSTON (ICIS)–A large volume of ethane in the Marcellus Shale natural gas deposits of the Appalachian basin could pose an obstacle to drilling and production, an analyst said on Monday.

The heat content in the ethane could cause the gas to liquefy and result in pipeline transportation problems, said Anne Keller, president of Midstream Energy Group.

Pipeline specifications limit the heat index for the natural gas stream for shipping, and this means much of the ethane content – which has a higher heat index – must be removed.

Much of the Marcellus Shale does not face this problem, but recently producers found a hot spot – an area with a higher volume of natural gas liquids (NGL) in the gas stream.

This had large ethane volumes that producers needed to remove in order to ship the natural gas through the existing pipelines.

But there is no current infrastructure in the northeast US to process the extracted ethane gas, so producers have nowhere to sell or use the extracted ethane.

“The amount of drilling and the low price of [natural] gas have combined to cause a situation where producers need to be able to sell NGL to have enough revenue to pay for their drilling and lease acreage acquisitions,” Keller said.

The ethane extracted from the natural gas stream cannot be wasted and producers need to sell it for additional revenue to maintain their operations.

The projected volume of ethane gas production for the Marcellus play could result in as much as 100m bbl/day. More realistically, the production would yield 50m-80m bbl/day when the ability to blend ethane gas has been considered, and owing to the fact that drilling would likely slow down if natural gas prices remain at their current low price, Keller said.

As of the week ended 15 October, natural gas futures had dropped to a record low for 2010, at $3.6/MMBtu.

Even lower production rates, however, would need to extract enough ethane to require additional infrastructure, Keller said.

This has only been a recent problem for players in the Marcellus.

“Previously, the natural gas produced in the east coast region generally had fairly low NGL content,” said Ron Gist, senior analyst for Purvin & Gertz. “However, producers found a ‘sweet spot’ in the Marcellus play in western Pennsylvania and nearby West Virginia that has higher NGL content.”

Extracting other NGLs in order to transport the natural gas does not pose as much of a roadblock. Propane can be sold in the local market for fuel. Normal and isobutane, in addition to natural gasoline, can be used at east coast refineries. The only use for ethane, however, is at crackers to produce ethylene. Currently, there are no ethane pipelines or crackers on the east coast.

“The ethane in [natural] gas raises its heating value to the point that the residue gas leaving gas processing plants cannot meet the specifications of the local gas pipelines,” Gist said.

Typical gas pipeline specifications for British thermal units (Btu) – a measure of heat – usually are between 1050-1125 Btu per cubic foot. This has been caused by requirements at the “city-gates,” such as New York City, where the gas is delivered to market.

Natural gas typically has about 950-1,150 Btu per cubic foot, while ethane alone has 1,783 Btu per cubic foot. When ethane is mixed in with natural gas it can substantially increase the heat of the natural gas stream.

Though some markets could possibly use natural gas with a higher heat index, the pipeline specifications would need to be changed. In addition, changes would need to be made to burners that are installed in people’s homes that use the gas for fuel. But to significantly revise specifications and allow hotter gas to flow through the pipelines could be dangerous as ethane ignites when it comes in contact with oxygen.

“Changing all of this would be a big deal,” Keller said.

Usually producers have to extract most of the other NGLs in the gas stream because they could liquefy in the pipeline and cause operational problems. But the amount of ethane volume in the wellhead of the hotspots exceeds the amount that can be removed in a liquid state and moved with the other NGLs.

Current limitations on the amount of ethane that can be mixed into the NGL stream for fractionation or transportation by truck or railcar is a maximum of 15%, and that is if most or all of the propane in the stream has been removed and sold locally. This is caused by the pressure limitations for transportation vessels. In some instances in the shale, more than 50% of the ethane needs extracted.

There have been some ways to move extracted ethane out of the northeast or use it locally; however these methods do not allow for removal of nearly enough ethane, Keller said.

“Once you’ve gone through those options and still have ethane to move, you’re pretty much stuck,” Keller said. “That point is expected to be reached within the next 12-18 months or so. So unless another solution is in place fairly soon, drillers won’t be able to produce those high ethane content wells.”

There are several projects under discussion for moving the ethane out of the northeast.

Possible options to transport ethane include a pipeline to move it to the Baton Rouge, Louisiana, market using the Tennessee natural gas pipeline; construction of refrigerated ethane storage facilities to move product via marine vessels to the Gulf coast; and there is a proposal to blend ethane with lower-Btu natural gas in order to meet pipeline specifications.

To discuss issues facing the chemical industry go to ICIS connect