Give A Little Bit (of Your Liquids to Me) – Delivering Utica Condensate to The Gulf Coast

The recently (re)announced Kinder Morgan Utica Marcellus Texas Pipeline (UMTP) is that company’s second iteration of a natural gas liquids (NGL) pipeline from Ohio to the Texas Gulf Coast. If built – the project would facilitate delivery of mixed NGLs (y-grade) and purity NGL products from the Utica to the Gulf Coast - where the liquids could be further processed and/or exported. Those purity products could include both plant and lease condensates. But as we discuss today - the project might currently be more attractive to NGL shippers anxious to get better prices for stranded northeast production than it is to condensate producers.

This blog continues analysis we initiated back in May looking at growing production of lease and plant condensate in the liquids window of the Utica in Ohio (see Give A Little Bit). Utica lease condensate production is currently projected by the Energy Information Administration (EIA) Drilling Productivity Report to reach 66 Mb/d by July 2015. Production of plant condensate (aka, natural gasoline or pentane-plus) from natural gas processing plants in the northeast (from both the liquids rich Pennsylvania/West Virginia Marcellus and Ohio Utica) is expected to be close to 60 Mb/d by the end of 2015 (we recently upped our earlier 50 Mb/d estimate based on EIA plant production data). Midstream companies are investing in new infrastructure to transport these condensate range materials to market. Our analysis started with a look at regional markets for lease condensate (an ultra-light crude that condenses out of the gas stream at the wellhead). We covered plans by the area’s largest refiner, Marathon Petroleum Company, to increase their processing of lease condensate and light crude at their Canton, OH and Robinson, IL refineries by adding a condensate splitter and new light crude handling capacity respectively. To feed these and other Midwest refineries, Marathon’s logistics subsidiary, MPLX is building the 180 Mb/d Cornerstone pipeline – due online by the end of 2016. MPLX is also shipping lease condensate down the Ohio River to their Catlettsburg, KY refinery that brought a splitter online in June 2015. Refineries in the Louisiana Gulf Coast region are also receiving Utica lease condensate by barge via the Ohio and Mississippi Rivers.

At least 4 barge terminals in Ohio and West Virginia are delivering these supplies. Episode 2 in the series - covered developing plans to move plant condensate or natural gasoline to Western Canada as diluent for blending with heavy oil sands crude - to enable the latter to flow easily in pipelines. Plant condensate is an NGL extracted from wet gas at processing plants – a similar material to lease condensate but with a defined specification that makes it more attractive for diluent blending. The Utica is geographically close to the origins of two major diluent pipelines from the Chicago area to Western Canada (Cochin and Southern Lights – see Parallel Lines). As a result a number of infrastructure projects have been proposed in the past two years linking plant condensate production in Ohio to these pipelines. We detailed the Kinder Morgan Utopia West project that would deliver up to 95 Mb/d of plant condensate to the Cochin and Southern Lights diluent pipelines in the Chicago area beginning in 2018. An interim Kinder Morgan project would deliver plant condensate to the Cochin pipeline via a rail terminal at Milford, IN - due online by the end of 2015. Subsequent to that post, MPLX pointed out that their Utica build out project plans ultimately include providing shippers on the Cornerstone pipeline with connectivity to the Cochin and Southern Lights diluent pipelines. This time we take a look at another Kinder Morgan pipeline project that could deliver both plant and lease condensate (as well as other NGLs) from the Utica to the Gulf Coast.

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