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Marcellus Changing Midstream Strategies

With Marcellus Shale production growing exponentially, midstream players in the region are handling that additional supply in different ways, company officials told a Pittsburgh-area audience last week.

"If you have some existing assets, you can really very strategically and efficiently expand those to keep up with what your customers need," Marc Weaver, vice president for business development at EQT Midstream, said at the Marcellus NGL & Shale Gas Infrastructure Summit last Thursday.

Created in 1988, the EQT-owned Equitrans transmission system includes 700 miles of pipeline from northern West Virginia into southwestern Pennsylvania. As of 2009 it could handle 600 MMcf/d of total capacity, but EQT added 210 MMcf/d of capacity since then, and plans to add more than 600 MMcf/d in 2012 and up to 500 MMcf/d in 2013 to meet demand.

Those projects include tripling operating pressures on segments of the system, adding interconnects to the Spectra Energy Corp. Texas Eastern Transmission Co. pipeline, expanding compression stations, looping pipelines and connecting to regional cryogenic processing plants (see Shale Daily, July 28; May 12; March 25; Oct. 5, 2010).

There are still challenges in the region, though, Weaver said.

The fragmented leaseholds in the region can lead to multiparty projects or the duplication of facilities, but a midstream player can capitalize on those challenges by spreading its credit risk across more companies and by creating economics of scale through larger projects, Weaver said.

While Equitrans is trying to manage an increase in Appalachian Basin supplies, Millennium Pipeline Co. LLC. is figuring out how to handle new supply sources. according to Stan Brownell, vice president of marketing.

"Our system has changed dramatically from its inception to where we stand today," he said, noting that increased throughput on the Tennessee Gas Pipeline system between 2009 and 2010 increased the supplies moving through the Stagecoach pipeline leading into the Millennium system and "basically displaced all the gas that was coming from Canada."

Millennium is working on four projects to add more than 1.2 Bcf/d of additional capacity to the company portfolio by the end of 2012.

That includes the Laser Midstream Pipeline to gather Marcellus supplies in Susquehanna County, PA, and move them to Millennium in New York -- a project set to come online in mid-September -- as well as several extension and expansion projects slated for this year and next year (see Shale Daily, July 15; July 6; Nov. 18, 2010).

To manage those additional supplies, Millennium is also having to change its engineering and operations, not just its capacity, Brownell said.

That includes a "tridirectional" flow from its Cornell compression station, or the ability to move gas into Canada, west to the Rochester, NY, area or east to the traditional demand centers around New York City, he said.

Increased Appalachian supplies will drive major infrastructure projects east of the Marcellus region to allow midstream players to switch from their current supply sources farther west, according to Scott Rupff, vice president of marketing for Iroquois Pipeline Operating Co. "All of us are having to learn to deal with changing flow patterns on our pipe," he said.

When the Iroquois Gas Transmission System came online in 1991, it handled Western Canada gas coming to the northeastern United States, but Rupff said Northeast supply could outpace demand by 2017.

As companies aim to make those connections, Rupff said there will be several drivers that guide which projects are ultimately successful.

Those include the actual sustainability of the Marcellus, as opposed to the decline curve models estimated by operators from early production; the growth of end-use demand that would keep basins from competing; and the "stare down" between producers and local distribution companies.

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