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DCP Midstream Eyes More Shale Plays, Chemical Build-Out

Being in the middle is not so much a challenge as an opportunity for DCP Midstream LLC, the Denver-based infrastructure and natural gas liquids (NGL) operator that has an eye on moving into the Bakken, Utica and Marcellus shale plays, according to DCP President Bill Waldheim. He told NGIShale Daily that those are about the only shale plays that fall outside DCP's reach these days.

The privately held firm, which is jointly owned by ConocoPhillips and Spectra Energy, has discussed nearly $4 billion in new infrastructure investments, mostly in the south-central energy center of the United States. Waldheim said in a recent interview that another $2 billion is probably in the cards over the next three to five years. He is particularly buoyed by the resurgence of the U.S.-based chemical companies, which are riding the shale gas boom and related liquids plays.

Dow Chemical Co., the nation's largest chemical company, is setting that tone loud and clear (see related story). This is music to the ears of DCP's Waldheim.

DCP has two major NGL pipelines under construction -- Southern Hills and Sand Hills -- to relieve bottlenecks out of Texas and Oklahoma production basins to Gulf of Mexico coastal markets. However, Waldheim said the midstream player is also looking north to developing shale plays in Michigan, including the Collingwood and A-1 Carbonate where DCP owns an existing underground liquids storage facility strategically placed near an expanding chemicals company. (Dow, coincidentally is headquartered in Midland, MI.)

The storage facility in Marysville, MI, handles propane and butane, and Waldheim said DCP hopes to add ethane as well when the nearby Nova Chemical plant completes an expansion of its Sarnia facility across the border in Canada.

"That facility provides downstream NGL services, and we hope to build on that if we get more involved in that area," Waldheim said.

Because shale plays have proven to be "the real deal," he said "the chemical companies on the consuming side of equation are comfortable that they have a competitive advantage in the international marketplace to expand their facilities because the chemical business usually runs on naphtha and gas oils internationally. Having low gas prices and high crude oil prices has really advantaged the chemical business. They are now embarking on a building program, expanding for the first time in many, many years new chemical crackers here in the United States."

Waldheim sees DCP and others in the midstream business as the "service providers linking the producers and the chemical companies. The increasing production of liquids-rich gas then allows us to expand the infrastructure to serve the chemical companies and to make sure the exploration and production companies have the takeaway capacity from the production they are drilling."

Expanding from Michigan, DCP Midstream could make its entrance in Utica and Marcellus shales, Waldheim said. "Our footprint is all throughout the central United States, north to south. We are not in the Marcellus yet, but that is an area we would like to get into. And we are not in the Bakken." It is likely the company will soon expand into both, he added.

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