UGI Energy Services LLC has announced plans to double its liquefied natural gas (LNG) production with a new 120,000 gallon per day facility in northeast Pennsylvania that will utilize Marcellus Shale gas.

A subsidiary of UGI Corp., the company said it expects to invest $60 million in the new facility, which would begin commercial operations by early 2017. The proposed plant would be located next to UGI Energy's Manning natural gas compression station in Wyoming County and would be supplied with natural gas from the company's Auburn gathering system.

Those pipelines already transport locally produced gas from an area of heavy of production in the state to major interstate pipelines for delivery to the Mid-Atlantic. The new facility would also include storage capacity.

Affiliate UGI LNG Inc. has operated the Temple LNG facility in southeast Pennsylvania's Berks County since 1972. The liquefaction plant there was recently expanded to produce up to 120,000 gallons of LNG per day. That location also includes 15 million gallons of LNG storage capacity.

"We have managed our investment risk by expanding LNG capacity in stages in order to keep pace with the growing LNG market," said UGI Energy President Brad Hall.

LNG has grown increasingly important as onshore natural gas output keeps rising, particularly in the Appalachian Basin, where acute bottlenecks have posed logistical problems for pipeline operators and left more customers turning to LNG for their supply needs. Truck fleets, oil and gas drilling rigs and remote industrial users not tied to the pipeline grid continue to switch to LNG (see Daily GPI, Oct. 17, 2014).

The company also expects demand for LNG to continue rising in the marine, rail and mining sectors. The new plant would also serve utilities during periods of peak demand.