Unleashed in the (North)East - Another Round of NGL Infrastructure in Marcellus/Utica

Natural gas production in the Marcellus and Utica plays is projected to rise by 30% or more by 2022 under all of RBN’s forecast scenarios, and production of Northeast natural gas liquids is expected to increase even more quickly. Midstream companies are responding to this next phase of gas/NGL growth with plans for still more gas-processing plants, fractionators, NGL storage facilities, and NGL takeaway capacity––pipeline, rail, ship and barge. Also, Shell Chemicals continues to advance plans for an ethane-consuming steam cracker in Beaver County, PA, and another petrochemical company may soon decide to build a cracker in Ohio. Today we begin a new series on the latest push by midstreamers to keep pace with NGL growth in the epicenter of U.S. gas and NGL production.

After growing at a breakneck pace throughout the 2010-15 period, rising from less than 1.7 Bcf/d in January 2010 to just over 21 Bcf/d in December 2015, natural gas production growth in the three Marcellus/Utica states––Pennsylvania, West Virginia and Ohio––slowed dramatically in 2016. As of November, it stood at about 22.6 Bcf/d, and in its latest Drilling Productivity Report (DPR), issued on February 13, the Energy Information Administration (EIA) projected that February 2017 production in the Marcellus/Utica would average ~23 Bcf/d. There are several reasons for the 2016 lull; they include the lack of pipeline takeaway capacity additions during most of last year; gas storage constraints last fall; and sagging NGL prices, due in part to low prices for crude oil and to high NGL takeaway costs.

Now, though, with long-standing gas-pipeline constraints out of the region being relieved and with demand for gas from U.S. power generators, liquefied natural gas (LNG) exporters, and Mexico on the rise (see Part 4 of RBN’s Drill Down Report on moving Northeast gas to Gulf Coast/Texas export markets, I Saw Miles and Miles of Texas), Marcellus/Utica gas production is in for another period of sustained growth. Because of the region’s highly favorable production economics, all three of RBN’s three price scenarios––Advance, Growth and Cutback––show Northeast gas (and NGL) production increasing by leaps and bounds by 2022 (see Figure 1 for the gas outlook).