No, this is not the Whoville located south of Mt. Crumpit within the mountainous high range of Pontoos. And there is no Grinch in this Houville, at least during the 2012 Christmas season. Instead, this Houville is the center of an emerging Marcellus/Utica based NGL hub soon to take its place among the largest in North America.
Over the next couple of years, almost 500 MB/d of new fractionation capacity will be built in the region, and it will start filling quickly. Sometime in 2016 or sooner, Houville will blast past Conway as the second largest Y-grade hub in the country, exceeded only by Mont Belvieu. That’s a big deal. So we need to spend some time understanding what is happening in this Houville, the big new NGL hub in Marcellus/Utica.
By the end of 2014, the northeastern U.S. will go from about 100 MB/d of NGL fractionation capacity to nearly 600 MB/d. That’s because wet gas production is growing by leaps and bounds in both the Marcellus and Utica. And just like we saw in Mont Belvieu (see Ready, Set, Go), the processing, transportation and fractionation infrastructure is trying desperately to keep up. Producers are aggressive and willing to partner with midstream companies to ensure their production is interrupted as little as possible. The vast majority of these midstream deals are supported by long term fee based agreements.
And also like Mont Belvieu, the sooner players get there, the better. There are lots of producers waiting anxiously to maximize netbacks on their production of NGLs, some of which is ethane now being rejected, or other products being transported long distances for fractionation, storage or simply to find a market. Remember, NGL’s aren’t of much value until they are fractionated (i.e., split) into purity products: ethane, propane, normal butane, isobutane, and natural gasoline. There is a very long history of processing and fractionation in the region, but nothing like the scale of what is happening now. We’ll get into those big developments in a minute.