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Atex Begins Accepting Ethane as NGLs Grow in Appalachia

Enterprise Products Partners (EPP) said Thursday the process of injecting ethane into the Appalachia-to-Texas Express (Atex) pipeline began late last month and will continue until the end of the year, with commercial service expected to begin in January.

The news is an undeniable boon for operators working in the Appalachian Basin, especially those drilling heavily in southwest Pennsylvania, where development in a super-rich wet gas area is growing. The 1,230-mile Atex originates there, in Washington County, PA, and will be connected to four fractionators, including Markwest Energy Partners’ Houston plant in Pennsylvania, its Cadiz and Utica East Ohio plants in that state and the Blue Racer Natrium plant in West Virginia.

EPP said the line will have an initial capacity of 125,000 b/d, which can be expanded to 265,000 b/d. Approximately 65,000 b/d is already contracted and expected to be transported initially. Those agreements are on 15-year terms.

Drilling is intensifying in southwest Pennsylvania near Atex's point of origin. Two core areas have shaped up there, with condensate and natural gas liquids (NGL) in gaseous form in reservoirs.

Range Resources, one of the Marcellus' largest leaseholders with about 1 million net acres, said last month that the most gas in place is not surprisingly located in the Utica/Pt. Pleasant, Upper Devonian and Marcellus formations. The company told analysts during an investor day presentation that it believes the bulk of its acreage is in the core of the basin.

Stacked opportunities with co-development of all three of those formations, combined with a current price lift of roughly $3/Mcf at the wellhead with NGLs, condensates and dry gas included in production, are luring operators from northeast to southwest Pennsylvania and creating demand for more liquids takeaway capacity.

"It's all of the above, the attraction of multiple pay horizons is a big one," said Michael Arthur, co-director of the Marcellus Center for Outreach and Research at Penn State University. "The Utica prospect alone could even be wetter in western Pennsylvania and Ohio; there's not a lot of data, but the Marcellus is almost certainly wet in the northwest too. As you head that way, the rock shallows and thins and there could even be oil there."

Atex terminates at EPP's Mont Belvieu, TX, complex, which includes more than 100 million barrels of NGL and petroleum liquid storage capacity, more than 750,000 b/d of fractionation capabilities and an extensive NGL distribution system. With the addition of its 270 mile Aegis ethane pipeline -- currently undergoing an expansion of up to 425,000 b/d -- EPP says it will link Marcellus-produced ethane to "every existing ethylene production facility in the U.S. and provide supply security to support construction of new crackers currently planned for the Gulf Coast," according to a press release issued Thursday.

"The Atex project provides producers in the rapidly growing Marcellus/Utica region with critical ethane takeaway capacity that is needed now to allow them to continue developing their reserves, as well as gain access to the largest NGL market in the U.S.," said A.J. Teague, chief operating officer of Enterprise's general partner.

"With its expandability and eventual accessibility to our ethane header system, Atex will supply petrochemical operators from Corpus Christi, TX, to the Mississippi River corridor in Louisiana with reliable sources of NGL feedstock, which continues to be cost advantaged compared to crude oil-based derivatives," he said.

Along with the Bluegrass Pipeline and Kinder Morgan's expansion of the Tennessee Gas Pipeline System (see Shale Daily, Nov. 11), Atex's capacity should help operators in the Utica and Marcellus move more liquids from the region. NGL production is bound to continue increasing in southwest Pennsylvania, the West Virginia panhandle and in Ohio's Utica.

A major land grab is concluding in northwest Pennsylvania as well, where a new front is opening across a largely undeveloped stretch of land in Mercer and Lawrence counties, among others.

The rock there is said to be shallow and thin, which will present some challenges, but subject to less maturation, the composition of hydrocarbons is expected to be wetter there.

"There's a possibility in a formation like the Marcellus that as you move northwest, things will get more wet than dry," said Terry Engelder, a professor of geosciences at Penn State. "The formations become shallower up there, which means the rock has not been heated as much as it has in the northeast."

Thomas Stewart, executive vice president of the Ohio Oil and Gas Association, said he hasn't seen specific data that suggests NGL production is rising in the Utica, but he suspects it will as more midstream companies build processing facilities throughout the state.

RBN Energy said last month that rising NGL output in Ohio has led midstream companies to develop and plan for processing facilities that will add 4.7 Bcf/d of cryogenic capacity between now and 2015.

More than 600 horizontal wells have been drilled to date in Ohio, but many are shut-in awaiting pipeline connections.

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