Midstream companies are planning to spend about $40 billion, mostly over the next three to five years, on infrastructure projects in Ohio, Pennsylvania and West Virginia to serve the Marcellus and Utica shales, according to a comprehensive analysis by Marcellus Drilling News (MDN).
In the second volume of its "Marcellus and Utica Shale Datebook 2013," MDN identified 32 firms that have a combined 111 midstream projects planned in the Marcellus and Utica shales. The average investment comes out to $364 million.
"The vast majority of these projects are planned for the next three to five years," said Jim Willis, MDN editor and contributor to NGI's Shale Daily. "There are a few that have longer time frames, some even as long as 10 to 15 years, but the majority of the money that's been announced is probably going to be spent over the next three to five years.
"There are probably three or four companies that are doing the lion's share of these projects, but there are a fair number of middle- or smaller-sized companies that have come along that are now getting involved."
According to MDN, seven of the 111 projects listed represent investments of at least $1 billion:
Columbia Gas Transmission LLC's modernization of its natural gas pipeline system -- $4 billion (see Daily GPI, Sept. 26, 2012);
Dominion's plans to export liquefied natural gas from its Cove Point terminal in Maryland -- $3.4 billion to 3.8 billion (see Daily GPI, Oct. 12, 2011);
Shell Chemical LP's plans to build a "world scale" ethane cracker near Monaca, PA -- $2 billion to $3 billion (see Shale Daily, March 16, 2012);
Williams Partners LP's plans for a Susquehanna Supply Hub -- $2.25 billion (see Shale Daily, Feb. 27, 2012);
Williams' and Boardwalk Pipeline Partners LP's plans to build the Bluegrass Pipeline, which would transport natural gas liquids to the Gulf Coast -- $1.5 billion (see Shale Daily, May 30);
Plans by DTE Energy, Enbridge Inc. and Spectra Energy Corp. to build the NEXUS Gas Transmission system from Ohio to Ontario -- $1.5 billion (see Shale Daily, Sept. 5, 2012); and
Spectra's New Jersey-New York Expansion Project -- $1.2 billion (see Daily GPI, July 2, 2012).
"I really didn't want to include anything that was truly speculative," Willis said. "If it's on the list, I think it has at least a 50% chance of happening. I think the vast majority are going to happen."
On Sunday, the Wall Street Journal said analysts are becoming skeptical that Shell would build an ethane cracker in western Pennsylvania, on the grounds that it would make more economic sense to use planned pipelines to export ethane to the Gulf Coast.
"If that Shell cracker doesn't happen, I'm convinced that a cracker is going to happen," Willis said. "Maybe it won't be a full blown cracker...maybe it will be a small regional one. But sooner or later there is going to be one in the region somewhere. West Virginia is determined to have one," (see Shale Daily, March 21, 2012;Jan. 30, 2012;May 6, 2011).
"Even if a few of these projects fall off the list, we're going to have massive investment in the Northeast over the next three to four years and beyond, and it's going to be on the order of $40 billion."
Willis said at least half of the midstream projects identified by MDN are in wet gas regions of the Marcellus and Utica.
"There are definitely some big projects here and there that are in the dry gas areas, but a lot of this is happening in the wet gas zones: in the upper panhandle of West Virginia, in eastern Ohio and in southwest Pennsylvania," Willis said. "That's where a lot of this is going."
Willis added that the region was seeing a record high in terms of investment in the midstream.
"If you were to calculate the number of wells that are actually getting drilled per year in the Marcellus and the Utica, I think there is actually more spending going on in the midstream at this point than there is in the upstream."