Due to increased natural gas production coming out of the Appalachian region, MarkWest Energy Partners LP said it will invest about $60 million to expand nearly all of its gas processing plants that serve the area. The company is the largest gas processor in the northeastern United States and has operated in Appalachia since 1988.
Denver-based MarkWest owns four gas processing plants and the Siloam fractionation and storage facility, all of which are located in Kentucky and West Virginia. The expansion includes replacing the company's existing Boldman and Cobb processing plants with cryogenic processing facilities. The new plants will increase the combined capacity at the two locations from 75 MMcf/d to 95 MMcf/d of gas and will increase the production of natural gas liquids (NGL) from 70,000 gallons per day to over 180,000 gallons per day. MarkWest will also modify the Kenova processing plant for greater propane recovery to increase production by approximately 10,000 gallons per day.
To support the expansions, MarkWest will spend $20 million to increase the capacity at its Siloam fractionation facility from 600,000 gallons per day to approximately 900,000 gallons per day. The Siloam expansion will also support significant growth in NGL production related to Equitable Resources' increased horizontal drilling program in Kentucky.
MarkWest Hydrocarbon will derive additional frac spread income from the NGLs processed by MarkWest Energy and marketed by MarkWest Hydrocarbon, the company said. In consideration of the capital investments made by MarkWest Energy, MarkWest Hydrocarbon has agreed to increase the existing processing fees paid to MarkWest Energy.
The Appalachia expansion is also supported by new agreements between MarkWest and Equitable Resources that modify and extend the NGL transportation, fractionation and marketing arrangements between the two companies through early 2015. Equitable has also acquired the Maytown processing facility from MarkWest.
As gas production in Appalachia climbs, producers are finding crowding in the energy patch there. West Virginia added 6,860 producing gas wells between 2000 and 2005, which was the fifth largest growth nationwide over that period. According to state officials, the gas wells produced 217 MMcf/d in 2005. The growth has sparked a dispute between West Virginia's powerful coal mining industry and its emerging gas industry, which recently moved to the West Virginia Supreme Court (see NGI, Nov. 19).
MarkWest's Kenova upgrade is expected to be completed in early 2008, the expansion of the Siloam facility in the third quarter of 2008, and the Boldman and Cobb expansions in early 2009.
Earlier this month Houston-based midstream operator Targa Resources Partners LP said indicative proposals to acquire MarkWest Hydrocarbon Inc. and MarkWest Energy Partners were set aside without any substantive negotiations. Earlier this year MarkWest Energy Partners bought 100% of the ownership interest in Santa Fe Gathering LLC and the Grimes Gathering System in Roger Mills and Beckham counties, OK (see NGI, Jan. 8).
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