On December 9, 2014 3:09 pm
By: Kristie Kubovic, Director of Communications, Shale Media Group
Edited by: Mindy Gattner, Editor, Shale Media Group
Photos by: Shale Media Group
The shale oil and gas industry is generally broken into three sectors: upstream, midstream and downstream. Upstream is the first stage and involves exploration and production. The midstream stage is associated with the processing, storing, transporting and marketing of natural gas; the final stage, downstream, is after production through the point of sale.
Upstream development in the Marcellus and Utica Shale plays has surpassed the midstream takeaway capacity, so there is accelerated midstream construction in an effort to move the energy source to market. The midstream sector alone accounts for a multi-billion dollar industry in the Marcellus and Utica Shale plays in Pennsylvania, West Virginia and Ohio.
On November 18th, Shale Directories and the Pennsylvania State University (PSU) Marcellus Center for Outreach and Research (MCOR) hosted Midstream PA 2014 at The Penn Stater Conference Center Hotel in State College, PA to focus on the critical midstream stage of the shale oil and gas industry. “The purpose of Midstream PA 2014 is to provide midstream companies the opportunity to update local businesses on their future activities and resource needs. For local businesses, it’s an opportunity to learn about midstream activities as well as learn how to do business with them. Local businesses also find the information valuable as they plan for 2015 and beyond,” explained Joe Barone, President, Shale Directories.
Throughout the day, popular topics included: pipeline construction, the polar vortex, regulation, exporting, flaring and the potential cracker plants. Around 200 in attendance heard from presenters:
• Curt Stambaugh, Chair, Oil & Gas Group for McNees, Wallace & Nurick;
• Helen Humphreys, Senior Corporate Communication Specialist, Williams;
• Anthony Cox, Director, Midstream Business Development, UGI Energy Services;
• Wade Horigan, Manager, Business Development, IMG Midstream;
• Joe McGinn, Senior Manager, Sunoco Logistics;
• Tom Gellrich, Founder, TopLine Analytics;
• Bunky Jordan, Sales/Marketing, H&H Enterprises;
• Monika Hirsh, Director of Business Development, The Elexco Group;
• Brady Schuerman, Partner, Right Angle;
• Frank Nieto, Senior Editor, Midstream Business; and
• William desRosiers, External Affairs Coordinator, Cabot Oil & Gas Corporation.
The day’s moderators comprised of:
• Joe Barone, President, Shale Directories;
• Matt Henderson, Shale Gas Asset Manager, PSU MCOR; and
• Jim Rodgers, Marketing & Business Development Director, Dawood Engineering, Inc.
Exploring evolving shale development trends, Henderson discussed: the maturing of Marcellus and Utica Shale development; constraints in transmission, such as capacity and lack of infrastructure; storage for the winter with the cold and potential polar vortex; how technology is driving development; and the increased movement of oil by rail. For example the amount of oil moving by rail has increased from 9,500 carloads in 2009 to an estimated 800,000 carloads in 2014.
In addition, Henderson looked at legislative and regulatory updates, exporting, and national and local midstream opportunities. For example, the U.S. invested $56B in midstream and downstream infrastructure in 2009. By 2013, that number was up to $90B. In addition, another $80B to $90B in investment is expected nationally annually through 2020. “This supports over 900,000 jobs, $59B to $75B in wages, $94B to $120B to the U.S. gross domestic product (GDP), and $21B to $27B in taxes,” explained Henderson, who also looked at the price tag, length and location of projected pipelines including the Marine East 2, PennEast, Diamond East, Leidy Southeast Expansion, Constitution and Atlantic Sunrise Project.
Pointing to the unprecedented pipeline activity, Stambaugh relayed, “Since 2010, over one-half of all major onshore pipeline projects pending at Federal Energy Regulatory Commission (FERC) have proposed a footprint in Pennsylvania. Fifteen billion dollars in pipeline projects are planned for the Appalachian Basin in 2015.” In a take on Penn State’s ‘We Are…’, Stambaugh looked at what the shale oil and gas industry is doing, which includes: “injecting billions of dollars into the economy of Pennsylvania, creating thousands of jobs with family sustaining income, delivering products that you use every day in a safe and responsible manner, planning and building new pipelines to help stabilize electricity prices, planning and building new pipelines to help reduce crude shipment by rail and reduce the price you pay for food, committing to purchase significant amounts of Pennsylvania manufactured steel pipe, and embracing technology to make our safe network even safer.”
Next up, Humphreys began by displaying an article about ‘New England’s Out Of Control Energy Prices,’ explaining that pipelines are key infrastructure that will enable the United States to fully benefit from shale development. She then discussed the upstream, midstream, and downstream sectors of natural gas production. Looking at natural gas liquids (NGLs), Humphreys explained, “NGLs are a naturally-occurring component of the natural gas stream and are separated from natural gas … . NGLs include ethane, propane, butane, and natural gasoline and are valuable building blocks for everyday products.” They are utilized by agriculture, the petrochemical and plastics industries, and for home heating.
In addition, Humphreys discussed what it takes to build the necessary infrastructure. “In areas where infrastructure is limited, planning is a must.” Important items to look at include: “hydraulic analysis, interstate takeaway capacities, working with existing and new landowners and regulatory authorities, partnering with contractors and vendors, and the customer’s drilling plans, which are driven by the customer’s: expectation of commodity pricing, resources and cost structure, and the application of drilling/production experience.”
Cox followed by exploring the infrastructure gap in the midstream sector, noting that the original pipelines were for oil and natural gas from the gulf region. He also analyzed a midstream case study, which looked at using shorter segments for more cost effective transport as opposed to interstate transport. Cox then viewed the PennEast Pipeline as a “safe and reliable way to deliver energy to Pennsylvania and New Jersey customers.” Concluding with a discussion on local sourcing, Cox says, “We do business with companies that we trust can execute; experience is key. Our industry is highly scrutinized and safety is paramount – we cannot afford to do business with companies that do not share our safety and quality philosophies.”
Looking at the historic, current, and projected resource mix (coal, natural gas, nuclear, and renewables) of electricity generation, Horigan began, “We need more than one.” IMG Midstream develops, owns, and operates small-scale electric generating projects in the Marcellus Shale region. These facilities are smaller plants, designed to utilize local gas, thus increasing efficiency and reducing emissions. Horigan explained, “The projects are built in close proximity to existing or planned natural gas production areas as well as local electric load/substations. This eliminates the need for long pipeline laterals or electric transmission lines. We buy gas direct from producers and midstream companies and keep projects at or under 20MW to increase speed from site identification to commercial operation.”
The IMG facilities utilize about two acres and generate enough power for more than 13,000 homes. They look similar to a compressor station, but aren’t. With a smaller overall footprint, these small-scale electric generating projects offer environmental and community benefits along with benefits to the natural gas industry.
Then McGinn gave an overview of the Mariner East Project, a pipeline project that will deliver propane and ethane from the Marcellus Shale in Western Pennsylvania to the Marcus Hook facility along the Delaware River near Philadelphia, where it will be processed, stored, and distributed to various markets. Mariner East will be created in two phases. Phase I will link Delmont, PA to MarkWest’s facility in Houston, PA. Phase II will consist of the construction of a new 350 mi pipeline from Eastern Ohio to the Marcus Hook facility. McGinn expressed, “We’re a Pennsylvania company, moving a local product and creating jobs. For the Mariner East Project, Sunoco Logistics will invest approximately $3B in Pennsylvania.”
Looking at the “North American advantage,” Gellrich followed by comparing the 1973 and 1979 energy shocks, which yielded gasoline price increase of 3.2 and 2.0 times, respectively. Consequently, the 2008 to 2012 shale shock offered a 3.8 times decrease in energy prices. Gellrich also noted, “Shale gas is good for many industries, but for the chemical industry the impact is dramatic as shale gas provides the fuel and raw material to produce chemicals. With those costs accounting for as much as 90% of the cost of chemicals, North American chemical producers have an insurmountable cost advantage versus global competitors. [This is the reason behind the recent expansion of cracker plant talk in the Appalachian Basin.] This will trickle down to almost every industry as 95% of all produces utilize chemicals. As an example, the Appalachian Basin is the heart of the plastics processing industry with half the North American production. They are expanding rapidly to leverage low cost chemicals via shale gas.”
Prior to lunch, a Midstream Vendor Panel was held with Barone, Jordan, Hirsh, and Schuerman, where the participants gave advice to the audience. Jordan pointed out the importance of knowing what the customer is looking for, building relationships, and living up to standards. He says it could be a challenge to make those changes. Hirsh chimed in that companies need to be fluid and change, listen to what they’re being told, and be proactive. While Schuerman added that safety is key. He also noted the importance of an effective, measurable marketing plan to generate leads.
After lunch, Nieto began by defining midstream and taking a look at the history of oil and gas and the effects of it, including the decline in Pennsylvania in the 1920s and the recent revitalization due to the Marcellus Shale play. “After years of experiencing a declining population, Pennsylvania is now seeing the energy, manufacturing, and petrochemical industries bringing citizens back home,” relayed Nieto, who also discussed last winter’s polar vortex, “The polar vortex provided the strongest evidence of a need for new midstream infrastructure in New England and New York.” Since last winter, New England and New York are better prepared as each region has several plans in place.
In addition, Nieto also discussed the petrochemical and manufacturing industries and the three announced ethane crackers in the Appalachian region. “Cheaper natural gas and NGLs are encouraging both the petrochemical and manufacturing industries to come back to the US. Forecasts range from one to five million new manufacturing jobs. In addition, up to $100 billion in US petrochemical investments are expected by 2025, which will create more than 300,000 new jobs in that sector.” Nieto concluded by discussing exports/foreign markets opening up and the legislative and regulatory efforts that could help the process.
The conference concluded with and E&P Operator Panel with Rodgers and desRosiers. Rodgers began with a look at Dawood, including images of a natural gas pipeline project in Southeast Ohio and a full depth reclamation in Susquehanna County, PA. DesRosiers relayed that the core of Cabot’s activity is currently focused on Susquehanna County and the Eagle Ford Shale play in Texas. “Cabot’s goal is for upstream development to not outpace takeaway capacity,” explained desRosiers. As a result, Cabot partnered with Williams to build the pipeline infrastructure and have it in place to avoid flaring.
Both also noted the importance of innovation and engaging with the community. Consequently, both companies are converting their fleets to run on compressed natural gas (CNG). In addition, Cabot has four rigs in the Marcellus running on natural gas. In terms of the public, Rodgers brought up the undercurrent of “not in my backyard” along with the importance of education, saying, “You can thank hydraulic fracturing for the 40 cent price decrease at the [gasoline] pump.” Similarly, desRosiers discussed the public’s misunderstanding of pipelines, relating, “[When the public thinks of pipelines, they often think of Alaska.] This is not the Alaska Pipeline—the above ground, 36″ pipeline. Most of the pipelines we’re here discussing are below ground.”
In addition to the speakers and presentations, exhibitors were on hand, including Groff Tractor & Equipment, Inc., a company that offers a wide selection of new and used equipment for purchase along with maintaining a large rental fleet. Mike Lester, Vice President, Groff Tractor & Equipment, Inc., explained, “It was an interesting conference. Plus we were able to introduce our new Terramac line, which complements our main CASE line. The Terramac Crawler Carriers are great for supplying needs on pipelines, which was the focus of the day.”
Shale Media Group (SMG) is the news, information, and education resource dedicated to the shale oil and gas industries by messaging across video, Internet, publications, events, and radio. For more, check out ShaleMediaGroup.com to access all platforms, including SMG’s latest endeavor–Shale Energy Business Briefs (SEBB), an ad free subscription based service, where subscribers receive a real-time, daily email, featuring concise, hard hitting shale news 7 days/week, 365 days/year. To sign up, go to sebb.us. Kristie Kubovic is the Director of Communications at Shale Media Group. Contact her at Kristie@ShaleMediaGroup.com.