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Unleashed in the (North)East - New Natural Gas Processing and Fractionation Capacity in Marcellus/Utica

Anticipating renewed growth in natural gas and natural gas liquids production in the Marcellus and Utica plays, midstream companies active in the region are planning new gas processing plants and fractionators, as well as new NGL takeaway capacity and in-region NGL storage. And Shell Chemicals has made a Final Investment Decision to build a $6 billion, ethane-consuming steam cracker in western Pennsylvania by the early 2020s. In today’s blog, “Unleashed in the (North)East—New Gas Processing and Fractionation Capacity in Marcellus/Utica,” Housley Carr continues our series on on-going efforts by midstreamers and others to keep pace with NGL growth in the epicenter of U.S. gas and NGL production.

In Part 1 of this series, we noted that RBN’s Advance, Growth and Cutback forward price scenarios call for natural gas production in the Marcellus and Utica plays to increase by 30% to 47% over the next five years, which is especially impressive when you consider that the region already is producing more than 22 billion cubic feet a day (Bcf/d). NGL production in the liquids-rich “wet” Marcellus (western Pennsylvania and northern West Virginia) and Utica (eastern Ohio) is projected to increase even more sharply, driven not only by gas production gains but by rising NGL demand (from new steam crackers and export markets) and the expectation that NGL prices will increase with that rising demand. Under RBN’s Advance Scenario (2022 Henry Hub gas prices of $3.90/MMbtu), Northeast NGL production (including ethane “rejected” into the natural gas stream as well as NGLs separated out for fractionation) would soar 74% to 1,287 MMb/d in 2022 (from 740 Mb/d in 2016) and production would rise 63% (to 1.207 MMb/d) under the Growth Scenario ($3.60 Henry Hub gas in 2022).

Natural gas production growth in the Northeast is made possible by recent and current efforts to increase gas pipeline takeaway capacity out of the region. We’ve discussed these new pipelines, pipeline expansions and pipeline reversals extensively in blogs and in Drill Down reports, most recently in Part 1 and Part 2 of our series, “I Saw Miles and Miles of Texas.” As gas production increases, particularly in the wet Marcellus and Utica areas, new gas processing capacity will be needed (to remove impurities and most NGLs), as will new fractionation capacity (to separate mixed NGLs––also known as “y-grade”—into “purity products” ethane, propane, normal butane, isobutane and natural gasoline) and NGL takeaway capacity (pipelines, rail, ship and barge).

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