Production out of the Marcellus-Utica is among the greatest in the world, but until now it was limited to where it could go. By Frank Nieto with Midstream Business January 2016 edition.
The supply of gas from the Marcellus-Utica (MU) is so prolific that need to be taken in every direction, see map. When the Marcellus first made headlines, it was assumed that it would primarily head east. This is an article that provides and update of the many uses that have been planned and the various factors that are coming into play;
- The credit and equity markets are making it harder for midstream companies to raise capital for new projects.
- The costs of the projects are getting much more expensive in the region, rising from $2M/ mile to $7-10M/mile mainly due to the regulations.
- The #1 underlying fundamental is zero growth in demand for electric power in the US. This has been true for 10 years as efficiency and federal standards have kicked in.
- Converting coal burning facilities is driving much of the demand in 2016. One of the challenges is building out the needed infrastructure requires significant capital, some states, for example PA, are putting in place favorable tax incentives to achieve these conversions.
- In the medium term, the demand driver will be exports of LNG. Cove Point, Dominion’s facility that is half way built and is to be finished in the end of 2017, has 20 yr contracts with power companies in Japan and India.
- The longer term question, 2020 and beyond is how the other world producers of LNG respond to more competition from the US export which are slated to go from almost 0 to the match the largest exporters.
- Another factor is the development of Cracker facilities in the Appalachian region. The Shell plant in PA is moving ahead slowly and the other 3 are waiting for prices to rebound and the development of storage facilities .
There are disagreements among producers , midstream operators , and analyst on the best markets for MU production, but one thing everyone can agree on is that there are still bottlenecks in place-but they are set to be cleared in the coming years. This will allow the MU to achieve their world-class potential.