Uncorking

The
Bottleneck
Production out of the Marcellus-Utica
is among the greatest in the world,
but until now it was limited to
where it could go.

By Frank Nieto, Senior Editor

VIN

TAG
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07

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28 January 2016

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MidstreamBusiness.com

he Northeast knows all

about gridlock, whether it
be the traffc in New York,
Philadelphia, Bostonor traffc and
legislative blockages in Washington,
D.C.there are no shortages of logjams
throughout the region.
Midstream bottlenecks are just the
latest in a long series of stoppages.
Luckily, there arent shortages of
projects designed to get production
out of the Marcellus and Utica shales
and to marketboth home and abroad.
Shale plays may be old hat for many in
the oil and gas industry, but its worth
remembering how new the industry is
for many in the Northeast and how long
construction can take in the region.
Its both an exciting and uncertain
time for the industry and no region
better exemplifes the changing landscape more than the Northeast. Long
a demand center for the hydrocarbon
industry, the region is frmly entrenched
as a dual supply-demand center, thanks
to the sheer size of the Appalachian Basins Marcellus and Utica shales and their
proximity to large population centers.
The Marcellus is such a valuable,
abundant asset for our region and our
country. In fact, it is such a prolifc
asset that the supply available to the
region signifcantly outstrips regional
market demand. Therefore the excess
supply needs to fnd markets out of the
region, Don Raikes, senior vice presidentcustomer service and business
development at Dominion Energy, told
Midstream Business.
Volumes wont be moving in any
one direction; rather, they will move to
multiple markets.
A compass strategy

As we reviewed this oversupply dynamic, we developed our compass

strategy to move gas out of the region.
We have projects that move gas north,
south, east and west, he continued.
While there wont be any one, single
market for Marcellus and Utica proMidstreamBusiness.com

duction to move, the Gulf Coast will

receive a sizable portion of volumes out
of Appalachia.
There are a lot of projects currently
proposed to move Marcellus and Utica
production all over the place. Weve seen a
few pipelines that have started to move gas
to the Midwest from Pennsylvania. A lot
of it is moving to the Gulf Coast due to the
power generation demand and the amount
of petrochemical and export capacity in
the region, Rob Desai, analyst, equity
research, at Edward Jones, told Midstream
Business. He added that a challenge is that
both credit and equity markets are making
it harder for midstream companies to raise
capital for new projects.
There is also potential for shipments
to Canada and the Southeast, though
both areas are regions where shipments
could take time to really develop. Canadian companies are developing pipeline
projects to move domestic gas to the
East Coast, which would force Marcellus gas into a competition with these
Canadian volumes.
This multimarket approach is quite
the change from just a few years ago
when it was assumed production would
primarily move east, but it is still having a positive impact on the region.
Raikes noted that the Marcellus Shale
is a global phenomenon known around
the world. However, the global market
is tight, and there isnt as much room
for growth as there is for displacement
of gas and liquids from other sources,
which is causing producers and operators to widen the search for ways to
relieve this bottleneck.
Keeping it local

When the Marcellus Shale frst made

headlines, the assumption was that the
Northeasts large cities like New York
City and Philadelphia would be the
primary benefciaries of production
on an end-use basis. As the size of the
plays recoverable volumes increased, so
did the scope of the potential markets
to areas outside of the region such as
January 2016 29

The Marcellus is such a

valuable, abundant asset for
our region and our country. In
fact, it is such a prolifc asset
that the supply available to the
region signifcantly outstrips
regional market demand.
Therefore the excess supply
needs to fnd markets out of
the region.
Don Raikes, senior vice president
customer service and business
development, Dominion Energy

the Gulf Coast, New England and the

Southeastlittle attention was paid
to local markets. However, there are
strong opportunities for this production
at home in central Pennsylvania.

Pennsylvania is in a great position

to increase the availability of natural
gas and keep prices competitive with
other parts of the country, Anthony
Cox, director, midstream business

development at UGI Energy Services,

told Midstream Business.
The company traces its roots in the
state to 1882 through its parent UGI
Corp. Though the two companies dont
operate as closely as other parent-subsidiaries because regulations place constraints over utility-midstream operator
parent-subsidiary relationships, the experience in the state still forms a critical
part of UGI Energy Services operations.
We have a fairly specifc geographic
focus where we operate in the areas that
we are experienced in. UGI has been
here a long time. Pennsylvania has a
complicated regulatory structure with
a lot of nuances and, despite now more
than a decade of experiencing shale gas,
natural gas delivery is still new to many
communities. So, having company roots
that go back more than 130 years helps
build and ensure local trust where were
operating, Cox said.
The biggest opportunities for UGI
Energy Services are in bridging the gaps
that exist between producing regions in
the western and northern parts of the
state with the high-demand regions in
south central and southeastern Pennsyl-

Gas Production Trends In Selected Regions: January 2012-June 2015

Cumulative change since January 2012, billion cubic feet per day (Bcf/d)

20

Bakken
Permian
Eagle Ford

15
10

Marcellus

Utica
Niobrara
Haynesville

0
-5
Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Since the beginning 2012, the Marcellus and Utica regions have accounted for
85% of increases in production from these selected shale gas regions

Source: U.S. Energy Information Administration

30 January 2016

MidstreamBusiness.com

Originally planned as an import facility, Dominion Resources

Cove Point terminal in Lusby, Md., is being reconfgured (left)
to export volumes from the Marcellus Shale to India and Japan.
Source: Dominion Resources Inc.

vania, while also delivering volumes to

neighboring states.
Two recent projects with this goal
in mind are the PennEast and Sunbury
pipelines. PennEast is designed to bring
Marcellus gas into the New Jersey market as well as into Manhattan through
shipping agreements with Con Edison.
The $1 billion PennEast Pipeline
will run 118 miles from Dallas, Pa., to
Pennington, N.J., where it will ultimately
interconnect with the Transco Pipeline.
Theres a lot of gas being moved in the
area where PennEast starts, and it will hit
some critical delivery points in Pennsylvania very close to power generation as it
moves south to New Jersey, Cox said.
The 35-mile Sunbury Pipeline will
run from Lycoming County, Pa., to
Snyder County, Pa., where 180,000
dekatherms (Dth) per day of its initial
capacity of 200,000 Dth per day will be
contracted to the Hummel natural gasfred power plant.
Rising costs

The number of projects being developed

in the region is partially responsible for
increasing the cost for labor and materials
and making project development more
complex. According to Cox, the cost of
pipe has risen from $2 million per mile
MidstreamBusiness.com

to $7 million to $10 million per mile. It

never gets cheaper, it only gets more complicated and expensive, he said.
Additionally, the terrain and the regulatory environment in the Appalachian
Basin make it more diffcult to build in
compared to places like Texas, Oklahoma and Louisiana. Those areas have
fatter land and sandier soil as well as
a more streamlined regulatory structure.
UGIs experience in the region helps
provide the company and its affliates
with a competitive advantage, especially
in understanding the local geography.
There is still risk involved with the development of new infrastructure, which
requires trust in the future growth of
the natural gas market.
Were here for the long haul because
weve been here a long time. A lot of the
existing distribution system that UGI
Utilities operates in northern Pennsylvania was originally built as gathering infrastructure from conventional wells that
were depleted many years ago. Theres a
long history of playing a role in that energy development, Cox said.
Powering the future

While Pennsylvania, Ohio and West

Virginia may have different terrain
than Texas and Oklahoma, the oil and

gas industry in in the Appalachian

Basin is similar to those regions as it
is a multigenerational industry. Construction and drilling in the region will
be taking place for decades as the Marcellus and Utica extend their reach into
other parts of the country.
Cox said that projects like PennEast
and Sunbury are needed to move supplies and bridge the market gap, but
there is also a need for creative programs to build out the distribution system. He cited UGIs Growth Extension
Tariff (GET) program, which allows
new customers to extend the cost of
extending utility lines to their properties
over a 10-year period.
These innovative programs allow
utilities to make assumptions of future
growth potential and spread out the full
cost of the expansion into an area where
customers arent necessarily signing up
on day one. These programs are really
needed in Pennsylvania to increase the
use of natural gas, Cox said.
One of the reasons for these types
of programs is to combat the biggest
challenge in the region, which is inertia.
Thus far the most success in developing
a new market for natural gas in Pennsylvania, and most other parts of the country, has been through power generation.
January 2016 31

Gas conversions

On the surface it may seem as though

the coal-to-gas power generation conversions taking place are due to the
lower cost of natural gas vs. coal, but
that is not typically the case.
Its not so much pure market-driven economics. A lot of these
conversions have been driven by regulatory requirements driving coal-fred
plants to shut down, Cox said.
However, natural gas is making
headway on a market basis in converting
home heating and industrial customers
from heating oil due to the considerably
lower costs associated with gas. Compared to heating oil or propane, natural
gas is also more convenient for customers, as it is piped into the home rather
than needing home delivery.
The real headwind for converting
customers has been the signifcant
upfront costs associated with the
conversion. These conversions are
economically viable and tend to have
relatively short paybacks, but they require upfront capital investments and
the confdence that the pricing advan-

tage will be there on a long-term basis.

The delta may have closed recently, but
gas still represents a signifcant savings
over oil, Cox said.
Pennsylvania has sponsored several
programs to help its citizens convert
their heating systems to natural gas, but
Cox said that more can be done by the
state to help continue the industrys
growth. Most notable would be an
attractive tax program for businesses
to help them make the necessary large
investments in the region.
Pennsylvania needs to be more
business friendly. The state should
leverage its position as the countrys
second-largest natural gas producer to
attract new businesses, not scare them
away with new energy taxes, Cox said.
We have the second-highest corporate
net income tax rate in the country.
He added that there is also more
work to be done when it comes to the
regulatory environment. There are a
lot of environmental restrictions and
multiple agencies that all do the same
thing, which requires companies to go
through two to three different agen-

cies. There is a lot of effciency that can

be gained by streamlining this to one
agency. Pennsylvania is defnitely not
the worst place in the country to work,
but it could be friendlier for this industry, Cox said.
Avoiding a calamity

Though UGI Energy Services is focused

on local markets, Cox cited the need
for increased transmission capacity,
specifcally to New York and New
England, to open up new markets for
Pennsylvania production.
On the coldest day of the year,
people pay more for energy in those
regions than anywhere in the world and
thats simply a matter of a bottleneck
in the transmission infrastructure on a
relatively short haul. Its easy to cross
on a physical basis, but there are a lot of
regulatory hurdles to overcome in order
to build pipe, Cox said.
He added that this constraint could
become worse as more natural gas-fred
power generation comes online in the
next three years.
Its a little scary to think of this
new power generation coming online
without new infrastructure. It could
be calamitous with the same limited
transmission capacity and even more
demand. We need to build this infrastructure now and not wait until we
have a real crisis, Cox said.
Interruptible service problems

Dominion Resources Atlantic Coast Pipeline is a market-driven project backed by multiple

utilities in the Southeast. The 564-mile system will move Marcellus natural gas to West Virginia,
Virginia and North Carolina. Source: Dominion Resources Inc.
32 January 2016

The current transmission systems for

Marcellus gas to these markets may
work fne on non-peak days, but Cox
said it is a less than perfect system on
peak days because it forces interruptible
customers to either use alternate fuels
or, if they continue to use natural gas,
do so by accessing a very tight spot market, invariably bidding up the price of
natural gas. To me, that is not working
perfectly; in a perfect world, everyone
that wants to use natural gas should be
able to do so and unfortunately every
winter thats not true, Cox said.
He added that interrupted service
also drives up fuel costs for consumers
and can result in unplanned outages as
a result of low pressure points within
the distribution system or plants having
MidstreamBusiness.com

LNG is also being used for domestic peak-shaving by UGI Energy

Services. This helicopter view shows the footprint of the companys
new, $60 million Manning LNG plant, adjacent to its Auburn
gathering system in Wyoming County, Pa. The facility is scheduled to
come online in 2017. Source: UGI Energy Services Inc.

to shut down because they cant fnd an

alternate fuel source.
This situation is much stronger in
Pennsylvania than in other parts of
the country as 80% of new capacity in
power generation has been natural gas
fred. PJM, the regional transmission
organization that, in part, serves Pennsylvania, will be adding more than 6,000
megawatts of combined cycle gas plants
in the next three years.

Desai said that he anticipates crude oil

prices to remain volatile for the next several years as supply continues to outpace
demand. Its diffcult to forecast the impact this volatility will have on NGL prices
since their relationship is changing.
Historically, liquids prices have
been based off of oil, but thats no longer the case and liquids are trading even
lower than in the past. We think that
will continue going forward because of
the supply outlook, Desai said.

Market impact

Cox acknowledged that the current

commodity price downturn was having
an impact on the region, especially for
producers, but believes that the situation places more impetus on building
new pipelines in order to enhance the
regions takeaway capacity.
An obvious sign of the impact of the
downturn on Marcellus producers has
been the production turnover in the
region, which began in the spring of
2015 after peaking in April. Ultimately,
this will be a positive, though, as it
will allow supply and demand to come
more into balance.
MidstreamBusiness.com

The road south

It will take until the end of this decade

for the Southeast market to begin to
further grow. While it is switching to
natural gas-fred power generation, the
bulk of this capacity is contracted by
Gulf Coast producers.
While pipeline capacity into the
West and South is being built, both
markets are already fully supplied and
the production into those regions isnt
going away anytime soon.
Marcellus gas moving to the South
could extend the geographic area of
depressed gas prices because the existing

producers from Texas, Oklahoma and

Louisiana wont give up their gas markets, Dan Lippe, managing partner,
Petral Consulting Co., told Midstream
Business. This production has the advantage of fowing through older pipeline systems at lower tariffs compared to
gas from the Appalachian Basin.
Dominions 564-mile Atlantic Coast
Pipeline has allowed Marcellus supplies
to make inroads into the Southeast
market. Atlantic Coast, which is 96%
contracted for its 1.5 billion cubic feet
per day, passes through West Virginia,
Virginia and North Carolina.
One of the unique aspects of this
pipeline is that it was developed as a result of a request for proposal from end
users rather than from producers. It is
these end users, including Duke Energy,
Dominion Virginia Power, Piedmont
Natural Gas, Public Service of North
Carolina and Virginia Natural Gas that
have contracted the systems capacity.
Market-driven pipeline

What separates this project is that

this is a market-driven project, as opJanuary 2016 33

Historically, liquids prices

have been based off of oil,
but thats no longer the
case and liquids are trading
even lower than in the past.
We think that will continue
going forward because of the
supply outlook.
Rob Desai, analyst, equity research,
Edward Jones

posed to a producer-push project. The

primary use for the supplies will be
for power generation to meet growing
market and environmental targets. The
strategic location of this project also
provides for future growth to these dynamic markets, Raikes said.
The markets that the Atlantic
Coast Pipeline will serve remain one
of the largest demand growth centers
in the U.S. On a long-term basis, the
U.S. Census Bureau predicts a population increase of 2.1 million in North
Carolina and 1.8 million in Virginia
by 2025.
The U.S. Energy Information Administration reported that in the sixyear period from 2008 to 2013, natural
gas-fred power generation demand
greatly increased in both states with
North Carolina increasing by 459%
and Virginia by 123%.
When you think of the Marcellus
and Utica, one midstream player that is
relatively quiet in the play is Enterprise
Products Partners LP, but the company
plays a very important role in the region
nonetheless through its 1,230-mile Appalachia to Texas (ATEX) Pipeline.
This system went into service in
2014 and has been helping to solve the
Appalachian Basins ethane problem
by providing transportation capacity for up to 190,000 barrels per day
(bbl/d) of ethane out of the Marcellus
34 January 2016

and Utica from Washington County,

Pa., to Mont Belvieu, Texas.
The beneft of moving this production to the Gulf Coast is because of the
unsurpassed fractionation and cracking
capacity at the Mont Belvieu, Texas,
complex as well as the increasing export
capacity offered from the Gulf Coast.

We focus as much on the demand

side of the equation as we do on the supply side, Bill Ordemann, executive vice
presidentcommercial, Enterprise Products Partners, said at Hart Energys Midstream Texas conference last October.
Ethane exports

Indeed, Enterprise is developing an ethane export terminal from the Houston

Ship Channel, following the success of
its LPG export terminal in the region.
Energy exports are critical to the
U.S. energy industry today. Without
LPG exports where would we be? Were
already dependent on exports to keep
our industry healthy. We have contracts
for exports to northwest Europe and
Asia. Its plentiful, reliable, cheap and
sustainable, Ordemann said. He added
that the increase in demand for ethane
and ethane exports will help out the
natural gas markets.
The Marcellus may be bigger than
every other gas play, but its later development means that its supplies are coming
online at a time when many other plays
have locked up various domestic markets
through long-term contracts.

The Mariner East system is an important facet of Sunoco Logistics plan to create a Northeast
hub that will move up to 600,000 barrels per day (bbl/d) of Marcellus and Utica NGL volumes
to domestic and foreign markets. This schematic shows the layout of the systems key Marcus
Hook Terminal. The project can be further expanded up to 800,000 bbl/d of shipping capability.
Source: Sunoco Logistics Partners LP
MidstreamBusiness.com

I dont think there is any market for

natural gas beyond the borders of the
Marcellus until pipeline capacity into the
East and Canada is built, Lippe said.
The news isnt much brighter when
it comes to coal-to-gas conversions, as
Lippe stated that coal companies will
fght government mandates to shut
down coal-fred power plants and could
tie up these conversions for years or
even decades in the courts.
There are already a great deal of
coal-to-gas plant conversions that have
taken place or are set to take place in
the U.S., which are already factored into
growth forecasts.
The No. 1 underlying fundamental
is zero growth in demand for electric
power in the U.S. It has been true for
10 years and will continue to be true
because of federal mandates requiring
continuous improvements in effciency
of everything that uses electric power,
Lippe said.
Should Marcellus gas struggle to gain
domestic market share, it is possible
producers will be forced to shut-in production for six to eight months per year.
Its still a seasonal business. Producers cannot produce all of the gas
that they have the capability of producing. The market is not there yet, and I
dont see that changing in the next fve
years, Lippe said.
Finding foreign markets

It is not all bad news for Marcellus gas

as it is set to make moves in the LNG
export market though Cheniere Energy
Inc.s Sabine Pass, La., terminal and
Dominion Resources Inc.s Cove Point
terminal in Lusby, Md.
Cove Point, like Sabine Pass, is a
former import terminal that is being repurposed to export LNG from the U.S.
to foreign markets. While Sabine Pass
receives a portion of its volumes from
the Marcellus, Cove Point is focused entirely on exporting Marcellus gas.
Cove Points two main customers
are in India and Japan, which on the
surface may be unusual due to the
longer travel time. However, both
countries are growing markets for LNG
and require secure volumes for the
long term.
MidstreamBusiness.com

UGI Energy Services Temple, Pa., facility provides the company with fexibility as it provides
liquefaction capability, as well as 1.25 billion cubic feet estimated of LNG storage and the ability
to truck it, terminal it or vaporize it into the local distribution system, or to Texas Easterns
system for peakshaving. Source: UGI Energy Services Inc.

Travel times to the Asian markets

will be about one month, but the global
LNG supply is projected to become
more liquid and cargos more fungible
as more liquefaction plants come online
through 2020. This will likely lead to
cargo swapping to drive out transportation ineffciencies. Cove Point is also
ideally situated to deliver cargos to
Europe, which has historically been a
balancing market, Raikes said.
Cove Point secured the frst U.S.
liquefaction deal with a Japanese
company by securing a contract with
Sumitomo Corp. and Kansai Electric.
Japan imports almost all of its energy
to fuel their economy, and it was important for them to have U.S. supplies
as part of their energy portfolio. One
of our colleagues from Japan compared
the signifcant natural gas reserves in
the Marcellus and Utica to the historic
oil reserves held by Saudi Arabia. He
called the United States Saudi America,
Raikes said.
Indias LNG need

The other half of Cove Points capacity is held by the U.S. affliate of GAIL

(India) Ltd. Raikes said that ample and

competitively priced energy supplies are
necessary to support Indias population
and economic growth as the countrys
population is expected to exceed Chinas in the next 10 years.
Indias need for LNG remains
strong and their imports continue to
increase. U.S.-sourced LNG will remain
a low-cost option to typical oil-linked
contracts, Raikes said.
LNG is also being used for domestic
peakshaving at UGI Energy Services
Temple, Pa., facility just north of Reading. Its a unique site because it can do
a lot of things. It not only liquefes, but
it also has 1.25 billion cubic feet equivalent of LNG storage and the ability to
terminal and truck it away as well as vaporize it into the local distribution system and the Texas Eastern transmission
system for peakshaving, Cox said.
UGI Energy Services is also developing the $60 million Manning LNG
plant in Wyoming County, Pa., adjacent to the companys Auburn gathering system. The facility will include
both liquefaction and storage with a
capacity of 120,000 gallons of LNG per
January 2016 35

Rice Midstreams recently installed Gold Digger

station in Belmont County, Ohio, serves a 12-inch
gathering line serving the areas Utica producers.
Source: Rice Midstream Partners LP

day when it comes online in early 2017.

This will be right in the middle of
Wyoming County to take advantage of
the low cost gas being put into the Auburn system in Wyoming and Susquehanna counties, Cox said.
Locating key components

Similarly, NGL will have much easier

access to both domestic and foreign
markets than dry natural gas because
they can be exported in large quantities
and stored easier than dry gas. According
to Lippe, besides local markets and the
Northeast, where Marcellus and Utica
production moves, is a function of where
there is storage capacity to accept the surplus that exists during the offseason.
The volumes are signifcantwere
talking 150,000 bbl/d of product at the
summer peak that needs to be shipped
from the Appalachian Basin to someplace with storage capacity. The only
place in North America with spare storage capacity is Mont Belvieu. All of that
surplus has to move there with a lot of
it being sold offshore as LPG or ethane
exports, Lippe said.
The advantage that NGL has over
natural gas is that the petrochemical
industry is building new facilities to use
ethane and propane in both the U.S.
and China. This renaissance of the pet36 January 2016

rochemical industry is the largest new

market in the near- and short-term for
the Marcellus and Utica shales, but it is
not a growth market.
Instead, Marcellus and Utica production will have to displace other production being used as feedstock for the
North American petrochemical industry. This is a sizable market because the
U.S. currently consumes between 25 billion pounds and 30 billion pounds per
year of polyethylene. One-third of this
production, or 10 to 12 billion pounds
per year, is purchased by plastics fabricators in the Northeast.
Cracker capacity

In the U.S., this new capacity is being

built along the Gulf Coast, but there
are several high-profle projects being
discussed in the Northeast. The most
notable is Shell Chemicals proposed
multibillion dollar world-scale ethane
cracker that would be built in Beaver
County, Pa.
The facility has been moving along
as the company has secured several
environmental permits, but no formal
decision has been made on the project.
All signs point to the project moving
forward, according to Lippe.
Shell is going to build a plant. They
have three of their environmental per-

mits and bought their property. It may

take another three to four years, but
they appear to be moving forward. They
will look to sell as much of their production to local plastics fabricators since
that market is big enough for Shell to
sell out to the market, Lippe said.
There are also a few smaller, but still
expensive, projects that have been announced by other companies, including Braskem and Odebrechts Project
ASCENT cracker in Parkerburg,
W.Va.; Appalachian Resins 600 million pounds per year cracker in Monroe County, Ohio; and PTT Global
Chemicals cracker in Belmont County,
Ohio. The Braskem/Odebrecht project
has been postponed, but not cancelled,
while the other two projects are also
being reviewed.
Ontario, Canada is viewed as an extension of the Marcellus-Utica market
by more in the industry because of the
relative close proximity and sizable hub.
Ontario is part of the overall Marcellus
market, it just happens to be under the
control of the Canadian government,
Lippe said.
One of the key players in Sarnia,
Ontario, is Nova Chemicals Corp.,
which is expected to further expand to
take advantage of production out of the
Marcellus and Utica. Nova Chemical
MidstreamBusiness.com

has a big advantage over companies

looking to build petrochemical facilities
in Pennsylvania, West Virginia or Ohio,
which is they have storage capacity,
Lippe said.
He added that the biggest headwind
for the development of a true Northeast
hub is the lack of storage in the region.
The fundamental problem and reason
pipelines to the Gulf Coast are needed is
because there isnt any storage. The area
needs 20 million to 30 million barrels of
storage, Lippe said.
This lack of storage will make it diffcult for the region to house multiple
crackers. A single cracker in the region
could coordinate its maintenance and
downtime while notifying shippers that
they will need to go into ethane rejection. More than one cracker makes it
more diffcult for this coordination
and the lack of storage will make this
very diffcult.

and CEO Michael Hennigan highlighted

Sunocos ability to further scale its Mariner East operations.
We remain bullish on the liquids
potential in the Marcellus-Utica region.
Our Mariner East 2 project, announced
with a design target of 275,000 bbl/d,
continues to press through the engineering and permitting phases, as we
target an end of 2016 start-up date.
Mariner East 2 service can be scaled to
a higher capacity, with relatively low
additional capital, as more demand is
created with the full upside capacity
of 450,000 bbl/d. Once fully online,
Mariner East 2 together with the 50,000
bbl/d at Mariner West and the 70,000
bbl/d at Mariner East 1, will be capable
of providing approximately 600,000
bbl/d of NGL pipeline takeaway capacity from the Marcellus and Utica
shales, Hennigan said.

There may be disagreements among

producers, midstream operators and
analysts on the best markets for Marcellus-Utica production, but one thing everyone can agree on is that there are still
bottlenecks in placebut they are set to
be cleared in the coming years. That will
allow the Marcellus and Utica to achieve
their world-class potential. n
Frank Nieto can be reached at
fnieto@hartenergy.com
or 304-322-2415.

Mariner East expansion

Smaller, more fexible hub

There is an old saying that to be successful, you dont have to make the
most money, you just have to make a
lot of it. On a similar note, the Northeast doesnt need tonor can itrecreate a hub the size of the Mont Belvieu
gas liquids hub to be successful. The
region only needs to build a hub that
can help open more marketsboth
domestically and internationally.
In this case, Sunoco Logistics Partners LPs Marcus Hook Industrial
Complex outside of Philadelphia will
serve this function. This facility includes
an LPG, refned products and crude oil
terminal with 2 million bbl of underground NGL storage capacity.
Besides the facilitys location, which
is more than 300 miles away from the
heart of the Marcellus, its fexibility is its
biggest beneft. Marcus Hook is capable
of receiving NGL volumes via pipeline,
truck, rail and marine transport and can
send out volumes via pipeline, truck
and marine transport.
Sunoco Logistics can export LPG
and ethane out of its Mariner East
system, which provides Marcellus and
Utica producers with access to foreign
markets. During a conference call to discuss third-quarter earnings, President
MidstreamBusiness.com

Sunoco Logistics is also considering

further expansion of the Mariner East
system to 800,000 bbl/d of shipping
capability to local and international
markets. The Mariner East system
has a decided logistics advantage over
the Gulf Coast for both the local and
international markets. Locally, there is
a seasonal premium in the Northeast
market, which can be accessed from our
pipe terminal and truck rack systems.
From a waterborne perspective, this is
about 1,500 miles closer to Europe, with
no nighttime restrictions, and no ship
congestion as seen in the Houston Ship
Channel, Hennigan said.
According to Hennigan, the Northeast propane demand in winter doesnt
get enough attention when compared to
shipping volumes to the Gulf Coast.
We believe that no Marcellus-Utica NGL should go to the Gulf
Coast, because we dont think thats
the right opportunity for the best netback. Were obviously advantaged
to the European market, but we also
say were at par with the other markets.
Were at par with the Gulf Coast as
far as shipping into the Panama Canal.
It continues to be our goal to convince
people that projects to the Gulf Coast
dont make sense.

Organic growth in the Appalachians remains

strong. EQT Midstream Partners has a $3
billion project backlog of projects. Many
of these will connect newly drilled wells
to existing pipeline systems. Source: EQT
Midstream Partners LP
January 2016 37

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