More US Marcellus projects needed to absorb ethane production

HOUSTON (ICIS)–Additional infrastructure in the US Marcellus shale region will be needed by 2016 to keep pace with growing ethane production and prevent a stall in the drilling of rich gas, an industry analyst said on Monday.

“I feel good about more announcements to come,” said senior natural gas liquids (NGL) analyst Jennifer Brickle with Bentek Energy.

By 2016, current processing and fractionation will be unable to absorb ethane production and more infrastructure will be needed, she said.

Ethane supplies in the Marcellus are expected to grow by 25% by 2016. Ethane production will exceed expected infrastructure capacities by tens of thousands of barrels, she said.

Shell and Dow Chemical have expressed interest in building fractionators in the US northeast.

Currently, gas processing capacity in Pennsylvania and West Virginia is 162m cubic feet/day (4.58m cubic metres/day), of which MarkWest owns 62% and Dominon owns 20%.

Caiman Energy also is working on a gas processing facility the area.

Current ethane production would not be enough to meet demand in another region.

“We believe the Mariner West project will be able to take most of the recovered ethane of 50,000-60,000 bbl/day,” Brickle said at the Infocast Marcellus Infrastructure Finance and Development Summit on 5 October.

Sunoco Logistics’ 50,000 bbl/day Mariner West pipeline system can carry ethane to MarkWest’s processing and fractionation facilities in southern Pennsylvania. Southeastern Pennsylvania is the primary rich gas production sector of the Marcellus.

“We don’t see the demand pull to increase further, considering what NOVA Chemicals has announced,” said Brickle.

An existing Sunoco pipeline will transport ethane purchased by NOVA to its cracker in Sarnia’s petrochemical sector in Canada. NOVA will initially take 37,000 bbl from the Sunoco pipeline, according to one estimate.

NOVA has existing ethane supply agreements with Caiman Energy; and a long-term ethane supply arrangement with Range Resources.

But as ethane production increases, Brickle said there could be a push to supply the growing ethane volumes to other regions, such as the US Gulf, to move the product out of the northeast. 

The Marcellus shale reserves may ultimately produce 175,000-255,000 bbl/day of ethane, according to some estimates.

Caiman Energy’s Art Cantrell said his company expects that Enterprise’s project for transporting ethane to the US Gulf will be the preferred project to Spectra and El Paso’s Marcellus Ethane Pipeline System (MEPS), which has completed its open season.

Enterprise Products Partners acquired TEPPCO Partners in 2009, which owned two gasoline pipeline that cut across Pennsylvania. Analysts said Enterprise plans to piggyback a natural gas pipeline on TEPPCO’s gasoline pipeline to support exploration and production in the Marcellus shale. TEPPCO has a pipeline that stretching from Chicago, Illinois, to Pennsylvania.

Cantrell said the Enterprise project has not been officially announced, but he expects an open season to be held in the next few weeks.

Enterprise’s spokesperson did not immediately respond with a comment.

Because of logistical challenges of changing ethane liquid to gas for the Spectra-El Paso MEPS project, analysts suspect shippers will have to pay an additional 18 cents/gal to transport ethane from the Marcellus to the US Gulf, making the project much less attractive.