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Marcellus Ethane Remains a Puzzle

Despite a large supply of ethane in the Appalachian Basin and no nearby place to put it, several projects to ship the commodity out of the region are challenged by the complexities of the marketplace, according to several project sponsors.

Following a recent open season, El Paso Midstream Group decided to slow its plan for a pipeline system to ship ethane to the Gulf Coast, while Enterprise Products Partners LP is expecting a successful open season for a similar project, and two related projects to pipe ethane to Canada and ship it to the Gulf Coast and Europe remain on track.

"Supply's critical for this," Randy Nickerson, chief commercial officer of MarkWest Energy Partners LP, said during a panel on ethane transportation at the Platts Fourth Annual Appalachian Gas conference in Pittsburgh on Friday.

MarkWest Liberty Midstream & Resources LLC and Sunoco Logistics LP recently announced a successful open season on Project Mariner West to connect the Marcellus Shale to Sarnia, ON, by pipeline and are planning Project Mariner East to move Marcellus ethane across Pennsylvania where it would be carried by tanker to the U.S. Gulf Coast or Europe (see Shale Daily, Sept. 8).

The competing projects are interdependent, Nickerson said. Because the total amount of ethane producers can technically recover from wet gas in the region could be three times as much as the "must recover" volumes required to meet blending requirements on major pipelines, producers and processors don't know how much supply they will need to move.

If regional production hits 3.5 Bcf/d, Nickerson said, Appalachian producers could be forced to recover as much as 80,000 b/d. Mariner West could take only up to 50,000 b/d of that, but other midstream projects can't move forward based on the remaining 30,000 b/d, and producers are going to be reluctant to increase recovery without a transportation option, he said.

That problem recently hit El Paso in the face.

El Paso announced the Marcellus Ethane Pipeline System (MEPS) in late 2010, but after an open season this summer it pushed its late 2014 timeline for bringing the 90,000 b/d system online to 2015 or later (see Shale Daily, Oct. 26, 2010). "While we had very high interest, we did not reach sufficient commitments in the binding open season that justified keeping this accelerate development rate," said Russ Mahan, vice president of business development for El Paso Midstream.

Although El Paso still believes its idea for shipping Appalachian ethane to the Gulf Coast by repurposing 850 miles of Tennessee Gas Pipeline Co. (TGP) pipelines is "viable," the company is now considering its Utica Shale Rich Gas Header Project to repurpose a section of the TGP mainline through the wet gas window of Ohio Utica to handle ethane volumes.

That solution would also allow ethane producers to eventually feed into MEPS, the Sunoco-MarkWest Mariner West project to Sarnia and the Enterprise Products system to the Gulf Coast, if or when those projects come online.

Meanwhile, Enterprise is holding an open season on a system to move up to 125,000 b/d of ethane from the Marcellus to the Gulf Coast starting in early 2014 on a new pipeline to Missouri and an existing TE Products Pipeline to Louisiana. While the company won't know if it can move forward until the open season ends on Nov. 10, vice president of natural gas liquids Russ Kovin said Enterprise only announces projects after it gets verbal commitments for minimum capacity.

"So if everyone does what they say they're going to do, this project will move forward," he said.

Enterprise also expects to have news this year about its Ethane Header System, a 550-mile system of mostly existing pipe to connect petrochemical facilities from Corpus Christi, TX, to Norco, LA, by late 2013 (see Shale Daily, Aug. 10).

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