If there is a “bet-the-farm” opportunity in natural gas infrastructure, it lies in the potential production growth in the Utica and Marcellus shale formations, according to Mark McGettrick, CFO of Dominion Resources in Virginia.
McGettrick discussed the prospects as an aside to an liquefied natural gas (LNG) panel discussion Wednesday at the Bank of America Merrill Lynch 2012 Power and Gas Leaders Conference. He said Dominion was essentially all in when it comes to gathering pipelines, processing plants and transmission pipelines to handle the growth of the two shale plays. Earlier this year, the company announced plans for an ethane pipeline in the area (see Shale Daily, July 18).
He was asked how Dominion, with its emphasis on its regulated businesses, can compete with the master limited partnerships (MLP) being developed in the two areas. A lot depends on the producers in the two areas, McGettrick said.
“If you look at an area where the producers are really betting the farm, it is in both the Utica and Marcellus shales, and so we could debate how much of an advantage that MLPs might have,” he said. “We sit right on top of the Utica find; we have pipes in the ground with zero basis to it and regulation in Ohio that is supportive of buildout without any regulatory oversight.”
McGettrick said Dominion has “geographic advantage” in Ohio, West Virginia and Pennsylvania, and he is confident his company “will get a big piece” of the midstream infrastructure business.
“We’re not set up to get all the business, it’s two big for one company,” he said. “There will be multiple companies that get various pieces of the gathering, pipeline and processing businesses. If you examine our involvement here to date, we have had success in gathering, processing and pipelines.
“As the producers’ confidence in Utica grows — there has been very little actual drilling so far — there is going to be a huge demand to build infrastructure and do it very quickly. And because we are sitting there with the assets we have already, we think we are well positioned in the coming decade to move this gas for producers in the area.”
McGettrick said for the Utica it is a question of the producers proving up what they think is there. “Is it going to be what most people think it is going to be? And if it is, then the infrastructure buildout will absolutely be there. If it is less than that, then it [the infrastructure development] will be slower, but it will be there.”
Based on current investments by some major parties, McGettrick thinks that the drilling and infrastructure opportunities will develop through the next 10 years and beyond.
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