Gulf coast cracker boom needs US northeast NGLs

Interview story by Jeremy Pafford

COLORADO SPRINGS, Colorado (ICIS)–Natural gas liquids (NGLs) from the US northeast will be needed in the long term to supply the cracker boom underway on the US Gulf coast, the CEO of Williams said on Monday.

Building the infrastructure to move the NGLs produced in the Marcellus and Utica shale plays to the Gulf coast will be key in the years ahead, said Alan Armstrong, who made his comments on the sidelines of the American Chemistry Council’s (ACC) Annual Meeting.

“Getting that infrastructure built to connect all these great resources with all these great international markets that want to come get it is a real challenge, and I think to me that’s perhaps the most critical thing that we need to solve to make the shale gas revolution here really work for the US and to really take advantage … for export capabilities,” Armstrong said.

Williams, which has its hands in both production and logistics, has proposed the Bluegrass Pipeline project to do just that, but the company suspended investment in the project back in April due to a lack of firm commitments from NGL producers within the Marcellus and Utica plays.

The pipeline project, announced in May 2013, would be a joint venture with Boardwalk Pipeline Partners. The pipeline would carry 200,000 bbl/day of mixed NGLs from Ohio, West Virginia and Pennsylvania, with an option to increase capacity to 400,000 bbl/day. It had been scheduled to come online in late 2015.

Williams still believes in the need for the Bluegrass Pipeline, Armstrong reiterated on Monday, saying that it “desperately needs to get built, or something like it needs to get built”.

Independent producers and not the large majors have found the most success in producing natural gas and associated NGLs in the Marcellus and Utica shale plays, and those “disaggregated” companies are not keen on making large long-term investments, Armstrong said. The Williams CEO understands their point of view when it comes to risky ventures such as pipelines.

“Believe me, building cross-country pipelines is very risky, with all of the regulatory and right-of-way and land issues that you have to deal with,” Armstrong said.

But shipping NGLs to the US Gulf coast by rail is not a sustainable solution in the long term as costs rise due to the increased demand for railcars in the US not only from NGLs but from oil and other products, Williams has said.

As NGL producers watch their margins deteriorate due to rail costs, the need for a pipeline such as the Bluegrass will become more apparent, Armstrong said.

The Gulf coast has plenty of NGLs for cracking currently, but the region will need more in the coming years as more of the announced cracker projects get built, the CEO said.

That boost in supply will need to come from the US northeast – or from somewhere else, he added.

“If the gas supplies are going to come from the Marcellus and the Utica – and the ethane is only going to come from gas supplies – if the ethane doesn’t come from there, then another gas field is going to have to get developed,” Armstrong said. “You can’t have that big a hole in your gas supply and expect we’re going to meet the ethane production levels that we think we’re going to need.”

The ACC’s Annual Meeting runs 2-4 June in Colorado Springs, Colorado.