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Gas Processing Capacity Expanding in Utica's Southern Core

To support rapidly expanding drilling programs in the Utica Shale's southern core, MarkWest Utica EMG LLC on Friday agreed to construct a third 200 MMcf/d cryogenic natural gas processor at the Seneca complex in Noble County, OH.

The Seneca complex already has two 200 MMcf/d gas plants on the drawing board, said the joint venture of MarkWest Energy Partners LP and The Energy and Minerals Group (EMG).

Seneca I is scheduled to begin operations later this year, and Seneca II is to be installed late this year (see Shale Daily, Nov. 7, 2012). The facilities would support production from several key producers, including frequent MarkWest partners Antero Resources and Gulfport Energy Corp., as well as Rex Energy, PDC Energy and Consol Energy.

Antero's rich gas production also is to be an anchor for Seneca III, scheduled to be in operation before the end of June 2014.

The partners also are developing the Cadiz complex in Harrison County, OH, which is anchored by Gulfport. The Cadiz I plant, with 125 MMcf/d, ramped up in May and the complex now has 185 MMcf/d of capacity, including a 60 MMcf/d interim refrigeration plant.

Capacity at Cadiz is set to increase to 326 MMcf/d by the middle of 2014 once Cadiz II, a 200 MMcf/d facility, is completed. The interim plant would be removed at that time.

MarkWest has become a first mover in the Utica by building on its midstream relationships in the Marcellus, said Chief Commercial Officer Randy Nickerson. MarkWest executives were on hand last Wednesday to discuss the partnership's U.S. midstream projects at the annual meeting.

"If we never do another expansion, if we never build another complex, if we never add another plant in the Marcellus, we'll be somewhere over 3 Bcf/d," said Nickerson. "If all that happens in the next three years, two years as we fill up those plants, if that's all we ever do again, what this shows is what that will mean for us growing from 500 MMcf/d or so to over 3 Bcf/d if we never do another deal. This is what this had meant to us. This is what success could look like 18 months, two years from now...

"So our challenge was, how do we take that same model and move it over to the Utica?"

The financial markets weren't open to the idea of lending when MarkWest saw an opening in the Utica, so it turned to EMG to support the plans, Nickerson said. "Here we are, a year or so later, fortunate enough that Gulfport has an enormous acreage position committed to us, Antero's made a large commitment to us...large, obviously a relationship we had from the Marcellus. Rex, a big relationship we had from the Marcellus now in the Utica as well. And PDC [was] new relationship for us in the Northeast, and then Consol, a key part of our history, key part of what we're doing over in the Marcellus. So this worked out perfectly for Utica."

Now "it's the same story in the Utica," Nickerson told the audience.

"What if all we ever did in this very young play, very growing play, was never do another deal, just fill off the assets that we have? Most of these assets like the Liberty, if they're already committed, the vast majority of these are already committed under our contract." The MarkWest Liberty facilities serve Marcellus operators in five locations of Pennsylvania and West Virginia. "Many of those have backstop, all of them in Liberty have backstop, most of these have volume backstop. What if we never did another deal? [What if] all we did was build this up?" MarkWest executives think they can build "just under 1 Bcf/d of processing...in the next couple of years."

MarkWest COO John Mollenkopf said the Utica projects with EMG are "about a year" into development, and "I think it's going to move a little faster than Marcellus throughout." There's also a reason the partners continue to build 200 MMcf/d processing plants, said Mollenkopf.

"The 200 MMcf/d gas plant is a standard design, and we can get those quickly. If you go to a unique design, it takes a lot longer to get the plant, and they cost a lot more. So we've standardized, really two sides. There's a 120 MMcf/d and a 200 MMcf/d plant. There's really three vendors in the United States that make those," and between them, all of the gas plants have been built by those companies. "That's worked very well for MarkWest to be able to move quickly."

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