Stranglehold - Would the Marcellus/Utica Benefit from In-region Ethane Storage?

Every day, the “wet” Marcellus and Utica shale plays are producing significant volumes of ethane, all of which needs to be moved out of regional plants, fractionators and de-ethanizers immediately, either by “rejection” into natural gas or on pipelines to the Gulf Coast, Ontario, or to an export terminal in Marcus Hook, PA. A leading midstream company—MPLX’s MarkWest subsidiary—has developed an ingenious, integrated approach for handling much of that ethane (and dealing with any disruptions), but its ethane-management system is not a regional cure-all, and the likely development of an ethylene plant in the heart of the Marcellus/Utica would only increase the region’s ethane-handling needs. Today, we continue our examination of natural gas liquids (NGL) storage needs in the Northeast with a look at how nearby ethane storage might help midstream companies that are not integral parts of MarkWest’s “ethane loop.”

As we said in the first episode of this series, the increased output of NGLs in the Northeast has highlighted—and exacerbated—what has always been a challenge for the region: a serious lack of nearby NGL storage capacity. Before NGL production took off a few years ago in the wet Marcellus and Utica shale plays, this storage shortfall mainly affected propane and butane, with their very seasonal demand.  The lack of Northeast NGL storage required a huge wintertime influx of propane and additional butane that had been stockpiled elsewhere. More recently, with Northeast NGL production booming, propane and butane barrels need to be moved out of the region by rail during the non-winter months and be railed back when the weather turns colder and motor gasoline blending limits are higher—killing producer netbacks in the process. NGL producers and midstreamers also face the challenge of dealing with the vast quantities of ethane now being produced in the wet Marcellus/Utica. There is currently no in-region demand for ethane, and (unlike propane and butane) you can’t just load surplus purity ethane onto rail cars due to its high vapor pressure.

We also described the plan by Mountaineer NGL Storage to develop a facility of the same name along the Ohio River in Monroe County, OH—a site within a short drive of many natural gas processing plants, fractionators, de-ethanizers and NGL pipelines (and, as we’ll get to, close to the future sites of a few ethylene plants being planned). Mountaineer’s proposed NGL storage facility would consist of several bedded salt deposit caverns capable of storing ethane, propane, butane and mixed NGLs (also known as Y-grade), and would be able to receive and send out Y-grade and “purity” products via rail, truck and/or pipeline (and, possibly, send out via barge too). While Mountaineer’s recent (non-binding) open season documents suggested an initial design capacity of up to 1.6 MMbbl and load-in/load-out capacity of more than 25 Mb/d, the positive results of the open season (requests for more than three times the 1.6 MMbbl proposed) convinced the developer to plan an offering of up to 2 MMbbl of storage capacity and more than 40 Mb/d of load-in/load-out capacity. Mountaineer is planning an early 2017 construction start and an early 2018 commercial operation date.

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