WHEELING - A West Virginia oil and gas leader remains confident the state can gain an ethane cracker, despite Chesapeake Energy's plan to send ethane from the Marcellus and Utica shales to Texas.
"It does not raise a red flag with me. I don't think this is an alarm at all," said Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia. "It falls in line with what needs to be done until we get an ethane cracker here."
Enterprise Products Partners announced the agreement with Chesapeake on Wednesday. The deal would see Chesapeake anchor Enterprise's proposed long-haul ethane pipeline from the Marcellus and Utica Shale regions West Virginia, Ohio and Pennsylvania to the Gulf Coast.
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Scott Hans, chief of the regulatory branch of the Pittsburgh District of the Army Corps of Engineers, speaks during a natural gas drilling conference in Morgantown on Wednesday.
James Johnson, senior vice president of marketing for Chesapeake, said of the deal with Enterprise, "As the most active driller and largest lease holder in the Marcellus and Utica Shale plays, Chesapeake has committed to 75,000 barrels per day over a five-year ramp-up period to anchor this critical infrastructure, and has the ability to secure additional capacity in the project."
"We view providing a major commitment in support of this project as an important step toward obtaining premium pricing for the significant volumes Chesapeake will produce from this resource," he added.
The 1,230-mile pipeline would have an initial capacity of 125,000 barrels per day of ethane, while commercial operations could begin in early 2014. Through connections at the partnership's natural gas liquids storage complex in Mont Belvieu, Texas, ethane production from the shale plays would ultimately have access to every ethylene plant in the U.S.
In addition to ethane, other natural gas liquids are propane, butane and pentane. These elements must be stripped from the methane natural gas at processing plants so the methane can be sold by utility companies.
"Even if you were to announce a cracker today, I believe you would still be at least 18 months away from having it ready to go," Burd said in noting the gas producers have to do something with the ethane now.
Michael A. Creel, president and chief executive officer of Enterprise, said, "The addition of this new pipeline would provide producers in the quickly expanding Marcellus Shale play, as well as the emerging Utica Shale, with much-needed midstream infrastructure to facilitate production of (natural gas liquids) rich natural gas and provide shippers with access to the highest value markets on the U.S. Gulf Coast for their ethane."
Creel said petrochemical companies on the Gulf Coast want the U.S. ethane to displace the more expensive crude oil derivatives.
Chesapeake joins Caiman Energy - the company operating the gas processing plant on U.S. 250 near Cameron - and Range Resources in planning to send Marcellus and Utica ethane out of the Ohio Valley. Caiman and Range have committed to send ethane to Canada for use by the Nova Chemicals company at a cracker located there. Both companies will transport the ethane to Sarnia, Ontario, via the Mariner West Project pipeline project developed by Sunoco.
As pipeline projects come and go, officials with Bayer Corp. believe a plot of land near the company's New Martinsville facility or a site in Charleston would be ideal for a local cracker, which would have several hundred jobs paying in the range of $60,000 per year. Royal Dutch Shell is one firm known to have an interest in building the cracker, as officials there announced plans to build a cracker somewhere in Appalachia.
