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Appalachia Producers Redirecting NGLs While Mariner East Offline

Appalachian producers with capacity on Energy Transfer Partners LP’s Mariner East (ME) 1 pipeline, which was shut down by state regulators late last week, are finding work-arounds to ship their natural gas liquids (NGL) to different markets using rail, other pipelines and additional sales arrangements.

The Pennsylvania Public Utility Commission ordered ME1 to suspend operations after sinkholes formed near it. ME1 delivers ethane and propane from Western Pennsylvania to the Marcus Hook Industrial Complex on the other side of the state near Philadelphia. Flows could be suspended until late next week so Energy Transfer subsidiary Sunoco Pipeline LP can test the system’s integrity.

Range Resources Corp. is the 70,000 b/d pipeline’s anchor shipper, with 20,000 b/d of ethane and 20,000 b/d of propane committed.

“The marketing team has already executed agreements for some of the Mariner East volume to be sold in alternate markets,” the company wrote last Thursday after the pipeline was shut down. “Another option for the company is to simply sell the Mariner East ethane as natural gas.”

In addition to its ME1 capacity, Range said it has another 41,000 b/d of ethane transportation or sales arrangements, which includes 20,000 b/d on the Appalachia-to-Texas Express pipeline and 15,000 b/d on Mariner West, which moves ethane to Canada. For propane, the company has access to another pipeline and railcars that would allow it to move the product uninterrupted. The company does not expect any production to be curtailed as a result of the ME1 suspension.

CNX Resources Corp. spokesman Brian Aiello also said there was no impact on production and operations expected “at this point.” The company has ethane capacity on the pipeline, but it has not disclosed how much. Aiello said CNX has been able to move some volumes to other pipelines and is rejecting some into the gas stream as well.

Marcus Hook, a former oil refinery, was repurposed for NGL storage, processing and distribution to domestic and international markets. Companies including Ineos Group Ltd. and Borealis have made investments to ship gas from the facility overseas. The first ethane exports were sent in 2016 to an Ineos cracker in Norway.

Rex Energy Corp. also has capacity on ME1, but it's unclear how operations have been affected if at all. CNX and Range are two of the basin’s leading NGL producers. Range produced more than 100,000 b/d in 4Q2017, making it one of the largest NGL producers in the country, according to its calculations.

Range said the alternative marketing would cut its netback price for propane by about $3.00/bbl. In separate notes to clients after the Range update, financial analysts seemed to balk at the setback, calling it negligible for now, but noting that the Northeast NGL market could be more impacted if the ME 1 shutdown lasts longer than a couple of weeks or affects the construction of ME2 and ME 2X.

Three sinkholes, one of which came within 10 feet of a house’s foundation, formed in West Whiteland Township near the area where horizontal directional drilling for the ME 2X pipeline is underway. The ME2 and ME 2X projects are under construction in the ME1 right-of-way and would run parallel for about 350 miles to move NGLs from processing facilities in Ohio, Pennsylvania and West Virginia to Marcus Hook.

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