Producers seeking better returns than dry gas provides these days have turned much of their attention to natural gas liquids (NGL)-rich plays, hoping to capitalize on strong NGL economics. This has sparked a midstream infrastructure buildout that could ultimately rustle NGL flow patterns as products from new supply areas seek markets.

In some areas NGL infrastructure activity is great because it’s needed for producers to be able to produce their gas. In the Marcellus Shale development plans are particularly intense as that’s where infrastructure is most needed.

“If [producers] have an option between drilling in the dry part of the Marcellus in northern Pennsylvania or the rich part of the Marcellus in southern Pennsylvania, they would rather drill in the dry gas area,” Bentek Energy LLC’s Ben MacFarlane, senior NGL analyst, told NGI. “The U.S. has shifted toward wet everywhere but the Marcellus, and that’s because the liquids-rich part of the Marcellus doesn’t have the midstream infrastructure in place to be able to deal with those NGLs right now.”

One option would be to lay more than 1,000 miles of NGL pipeline from the Marcellus to Mont Belvieu, TX, a fractionation capital. “That would have been expensive to go all the way down there,” MacFarlane said. So the industry is planning to go the other way. The Appalachian play won’t go wanting for an NGL outlet for long as multiple projects have been announced to address the need.

Kinder Morgan Energy Partners said it intends to modify and expand the existing Cochin Pipeline system to transport NGLs from the Marcellus Shale to fractionation plants and chemical markets near Sarnia, ON, and Chicago.

The project is not alone. Recently Enbridge Inc. said it was planning an NGL pipeline from the Marcellus in southern Pennsylvania and northern West Virginia to markets in the Midwest (see NGI, March 29). And in February Houston-based Buckeye Partners LP and Calgary-based NOVA Chemicals Corp. said they would explore the potential for a mixed NGL pipeline from the Marcellus in Pennsylvania to the refining and petrochemical complex in the Sarnia-Lambton area of Ontario (see NGI, Feb. 15). Additionally, MarkWest Liberty Midstream & Resources LLC said recently it would expand its processing and fractionation capacity in the Marcellus (see NGI, April 19).

Kinder Morgan’s Cochin Pipeline includes plans to construct approximately 250 miles of NGL pipeline from the Marcellus Shale in southern Pennsylvania to the Cochin interconnect at Riga, MI. From Riga, Kinder Morgan anticipates that product would be transported through the existing Cochin Pipeline to Windsor, ON, and then through the Windsor-Sarnia Pipeline to Sarnia.

Kinder Morgan also plans to reverse the eastern leg of its Cochin pipeline in order to move NGLs from Riga to the Chicago area, where it expects to build an additional pipeline to connect to existing fractionation facilities and chemical plants.

“Our proposed pipeline and key existing infrastructure offer NGL producers the quickest and most efficient solution to get their product to the market,” said Don Lindley, vice president of business development for Kinder Morgan’s products pipeline group.

Lindley told NGI his company’s project is greatly advantaged by having pipe in the ground already. “We think that with about 250 miles of [additional] line…that we can be in business to deliver to existing markets that have existing fractionation capacity and existing chemical plants in both those markets as well,” he said.

The Buckeye project is similar to Kinder Morgan’s, Lindley said, but it would require that more pipe be laid. “That is the primary advantage that we’ve got,” he said. The Enbridge project is a competitor as well, but again it would require more new pipe to reach the same market, Lindley said.

MacFarlane agreed on the value of having pipe in the ground already. “I sure like the announcement by Kinder Morgan,” he said.

The Kinder Morgan project would be designed to transport mixed NGLs (Y-grade), as well as purity NGLs, such as ethane, and will have an initial throughput capacity of 75,000 b/d, which could be expanded to handle up to 175,000 b/d.

A recent decision by Canada’s National Energy Board directing the reconnection of the Cochin Pipeline to the Windsor-Sarnia Pipeline will enable Cochin shippers to have access to the Sarnia chemical complex. Kinder Morgan anticipates offering transportation from Marcellus to Sarnia for less than 14 cents/gal.

Lindley said the market has room to accommodate the extra NGLs from the Marcellus. “Some of the paths that the products are taking may end up getting pushed around differently than what is happening right now,” he said. Especially on the ethane side, the markets in Chicago, in Sarnia would like to see more ethane, as well as Canada would like to see additional ethane.”

An open season for the project is expected to be held in the second quarter. For information, contact Karen Kabin at (713) 369-9268, or Karen_Kabin@kindermorgan.com; or Lindley at (713) 369-8840.

Separately last week, Dominion announced a project to gather, process and transport high-Btu gas from the Marcellus as well as separate plans to partner with Exterran Holdings Inc. in the development of two gas processing plants in the Appalachian Basin.

One of the two processing plants to be designed and built by Exterran is to be an 8 MMcf/d plant in Carlisle, OH, and the other is to be a 10 MMcf/d plant in Schultz, WV, Dominion said. The plants are to be owned and operated by Exterran under a 12-year services agreement with Dominion. Construction is expected to begin immediately. Commercial operation of the Carlisle plant is anticipated in January, and commercial operation of the Schultz plant is anticipated in May 2011.

The Carlisle plant is expected to allow more gas to be processed and delivered into the Dominion East Ohio distribution system. The Schultz plant is expected to allow more gas to be produced into Dominion’s gathering system in West Virginia, processed, and then delivered to market through Dominion Transmission’s interstate pipeline system.

“Growing local production calls for increased processing equipment in the Appalachian Basin,” said Paul Ruppert, senior vice president of Dominion Transmission. “These projects will benefit both local producers and the local economy. The two new state-of-the-art processing plants will provide high-quality natural gas for consumers and will also produce a variety of natural gas liquids valued in the market today.”

Also last week Dominion Transmission announced a project to gather, process and transport high-Btu Marcellus gas in Marshall and Wetzel counties, WV, and surrounding counties in West Virginia, Pennsylvania and Ohio. The company’s Marcellus 404 Project is designed to provide firm and interruptible transportation, as well as gathering and processing services, for up to 300 MMcf/d. Fractionation capacity for 32,000 b/d of NGLs will be available.

Dominion plans to locate new processing and fractionation facilities in north-central West Virginia. Once processed, the gas can be delivered into Dominion Transmission’s system, or into one of several other gas outlets in the vicinity of Clarington, OH.

As part of the project, Dominion will request authorization to convert an existing transmission line in Ohio and West Virginia, TL-404, into a wet gas service line. Producers may connect directly to TL-404 or request that Dominion construct additional gathering facilities to allow delivery of their production to TL-404. The project will be phased in, providing 45 MMcf/d of service initially and ultimately expanded to 300 MMcf/d. Initial service will be available approximately one year after receipt of adequate support for the project, Dominion said. Processing and fractionation will be phased in to correspond with producer needs.

For information on the Marcellus 404 Project, contact Jeff Keister at (804) 771-4459 or Ron Ridgway at (304) 627-3207.

Appalachia isn’t the only region where midstream development is planned. ONEOK Partners LP said last Wednesday it will spend $405-470 million by the end of 2011 on projects in the Bakken Shale in the Williston Basin in North Dakota and the Woodford Shale in Oklahoma.

The Bakken is a play that’s been under the industry’s radar screen with regard to liquids output, MacFarlane said. “Liquids production has gone up in the last 18 months to 8,000 b/d in North Dakota, and that’s an 84% increase, so that’s a lot,” he said. “Nobody’s really talked about that much,” he said, noting that infrastructure constraints have yet to materialize.

The ONEOK projects include construction of a 100 MMcf/d Garden Creek processing plant in eastern McKenzie County, ND, and related expansions, which are estimated to cost $150-210 million and will double the partnership’s processing capacity in the Williston Basin. Completion of the facility is expected in the fourth quarter of 2011.

“Producers with significant acreage dedications to ONEOK Partners’ assets continue to aggressively develop these areas and need additional infrastructure,” said ONEOK Partners COO Terry K. Spencer.

The partnership’s gathering and processing segment will also spend $200-205 million this year and next on new well connections, expansions and upgrades to its gathering system in the Bakken Shale.

In the Woodford Shale in 2010 and 2011 the partnership will spend $55 million on gathering and processing. These projects include connecting the partnership’s western Oklahoma gathering system to its existing Maysville processing facility in central Oklahoma, allowing it to optimize its Oklahoma processing capacity and accommodate growing volumes in the Woodford Shale area. ONEOK Partners said the project is under construction and expected to be completed during the fourth quarter.

Spending includes expansion of the partnership’s Oklahoma NGL gathering system to connect a processing plant currently under construction and expected to be completed in the fourth quarter.

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