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Appalachian Basin Lacks Adequate NGL Storage, Pipelines For Demand, More Crackers

As shale development continues to unfold in Appalachia and with Royal Dutch Shell plc's decision to build a multi-billion dollar ethane cracker in Western Pennsylvania, getting more natural gas liquids (NGL) storage and other infrastructure built is critical, according to several experts who spoke at an industry conference in Pittsburgh this week.

Much of the focus at the Northeast U.S. & Canada Petrochemical Construction Conference was about capitalizing on the recent final investment decision announced by Shell and to get similar projects built in the region, developing a more robust chemicals market and getting more NGLs flowing from Ohio, West Virginia and Pennsylvania. The region, speakers agreed, lacks the kind of liquids infrastructure that could seriously help move that process along.

The Appalachian Basin is home to abundant natural gas storage as it has long been a staging area to move gas to the Northeast. But its NGL storage and pipeline options are inadequate. At Mont Belvieu, TX, for example, there is 200 million bbl of NGL storage alone, said Blue Racer Midstream LLC’s Marc Halbritter, senior vice president of business development. In all of the Northeast there's about 5-14 million bbl of NGL storage, he said.

"It depends on how you look at proprietary storage versus publicly available storage, but it doesn't change the fact that there's very little NGL storage in the Northeast relative to the Gulf Coast," Halbritter said.

Shell's Appalachian cracker, which would consume about 100,000 b/d of ethane, is scheduled to come on stream early next decade (see Shale Daily, June 28; June 7). It joins a growing list of midstream options for Marcellus and Utica shale liquids.

It was only in 2014 that some of the basin's first NGL midstream infrastructure projects came online, with the 1,230-mile Appalachia-to-Texas Express ethane pipeline and Sunoco Logistics Partners LP's Mariner West pipeline entering service to move a combined 175,000 bbl of ethane to the Gulf Coast and Canada, respectively.

Sunoco's Mariner East (ME) 1 pipeline entered service earlier this year to deliver ethane and propane  from Western Pennsylvania to the Marcus Hook Industrial Complex near Philadelphia for export overseas. The company's 350-mile ME 2 pipeline is also expected to enter service next year to transport NGLs from Ohio, Pennsylvania and West Virginia to Marcus Hook, while it continues to gauge interest in a third pipeline with an ongoing open season (see Shale Daily, Sept. 14, 2015). Kinder Morgan Inc. also has plans for the Utopia Pipeline, which would move ethane products from Ohio to the Sarnia, ON, petrochemical market (see Shale Daily, June 29).

Still, only one NGL storage project has been publicly announced. Mountaineer NGL Storage LLC said in May that it received requests for more than three times its initial planned capacity in Ohio during a nonbinding open season (see Daily GPI, May 25). Mountaineer now plans to offer up to 2 million bbl of initial storage capacity with more than 40,000 b/d of load-in and load-out capacity at its project in Monroe County.

"The one thing I think will really help and allow the market to take off in [Appalachia], will be the creation of storage," Halbritter said. "[Mountaineer] will be tied into the pipeline network, allowing ethane, propane, butane, gasoline to be stored, and I think that will help take some of the fluctuations out and the ethane supply for people like Shell will be more reliable."

"Being able to find the spot, the location for storage of ethane, as well as having the pipeline infrastructure to move it to places where we can manage it, I think, is absolutely critical," said Marcellus Shale Coalition President David Spigelmyer. "I will tell you that there are certainly monies that are going to be invested in liquid storage in Southwest Pennsylvania, Northern West Virginia and Eastern Ohio or some common location there where it makes perfect sense to get gas to the cracker, or crackers, that are built in that region, including Royal Dutch Shell's."

While the commodities downturn has forced many Appalachian producers to retreat to their dry gas acreage and ethane has traded for pennies on the dollar, it has historically been worth more than natural gas and is projected to recover, Halbritter said. Ethane demand is expected to grow as more crackers come online on the Gulf Coast and in the Northeast. Besides Mountaineer's project, other NGL storage projects are rumored to be under consideration in the region, Halbritter said, while midstream companies are even now thinking about more ways to move liquids.

Ethane is a major part of the gas stream in the basin, accounting for 55-62% of a typical NGL barrel there, while propane accounts for about 25%, according to Matt Curry, founder of consultancy Dreadnought Solutions LLC. "It was actually an operational concern," in the early days of the Marcellus, he said, "more than it was a marketing opportunity." But with more demand expected and interstate pipeline specifications that don't typically allow the heat value of gas to be any higher than 1,100 Btu, rejecting ethane is becoming a less desirable option.

Sunoco’s Joseph Colella, senior vice president for business development, said all three Mariner East pipelines would have a combined capacity of up to 745,000 b/d. He added that if ME 2X is constructed, the third pipeline that would run parallel to ME 2, then ME 1 could be converted to natural gasoline or become a bidirectional line for refined products, such as gasoline, diesel or jet fuel, for example.* Marcus Hook already has 900,000 bbl of above ground refrigerated NGL storage, but when ME 2 is completed that would increase to 5 million bbl of combined pressurized and refrigerated storage.

Two other crackers that would be similar in size to Shell's have been proposed by Thailand's PTT Global Chemical pcl in Belmont County, OH, and by Braskem SA in Wood County, WV (see Shale Daily, Sept. 3, 2015; Nov. 14, 2013). While those companies are still deciding whether to construct those facilities, state officials who spoke at the petrochemical conference in Pittsburgh believe they will ultimately be built (see Shale Daily, June 27). Secretary of the West Virginia Department of Commerce Keith Burdette said infrastructure issues in the region recently prompted a coalition of industry companies to match funds for a liquids storage study to see what exactly is still needed. Speakers agreed that additional storage would make the market more stable for producers and consumers alike.

"To be quite honest, I happen to believe that Shell, Braskem and PTT would have been much farther along had there been a storage solution in this part of the country," Burdette said. 

*Correction: In the original article, NGI's Shale Daily incorrectly stated that Sunoco's ME 1 pipeline could eventually be converted to carry natural gas if ME 2X is built, when in fact ME 1 could be converted to natural gasoline or become a bidirectional line for refined products, such as gasoline, diesel or jet fuel. All three Mariner East pipelines would have a combined capacity of up to 745,000 b/d, and could not be scaled higher as the original article said. NGI regrets the errors.

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