On February 9, 2015 6:03 pm
By: Kristie Kubovic, Director of Communications, Shale Media Group
Contribution By: Rick Stouffer, Senior Energy Editor, Shale Energy Business Briefing
Edited By: Mindy Gattner, Editor, Shale Media Group
Hart Energy hosted the Marcellus-Utica Midstream (MUM) Conference and Exhibition from January 27-29, 2015 at the David L. Lawrence Convention Center in Pittsburgh, PA. Themed “Extending the Reach: Meeting Global Demand,” the conference focused on the midstream sector of the Marcellus and Utica Shale plays.
The shale oil and gas industry is typically 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. The midstream sector alone accounts for a multi-billion dollar industry in the Marcellus and Utica Shale plays in Pennsylvania, Ohio, and West Virginia.
“The Marcellus has emerged as a world-class producer. The Utica, for its part, is an impressive contributor to North America’s energy output as well. These two unconventional shale plays, taken together, have done no less than reshape the energy business,” stated Paul Hart, Host, Marcellus-Utica Midstream Conference and Exhibition, and Editor-in-Chief, Midstream Business, who added, “Moving the abundant flows of natural gas, gas liquids, and crude to market requires re-plumbing North America’s midstream network. … This conference focuses on how it will happen – even in a price-challenged environment.”
The “price challenged environment” that Hart is referring to is the recent nose-dive of crude oil prices and the subsequent effects on the shale gas industry. The most recognized ramifications have been in the upstream sector, particularly with the producers, where rigs have been laid down and both budgets and jobs have been cut. “Hart Energy’s Marcellus-Utica Midstream Conference and Exhibition emphasized that this may be a temporary correction, but meanwhile the Marcellus and Utica regions will continue to grow and have a bright future,” expressed Hart.
Attendees had the opportunity to listen to conference sessions from over two dozen speakers and moderators on the latest information and key issues affecting midstream development from the crude oil price drop to exports to infrastructure. Here are some highlights from a few of the conference sessions.
Regulatory Spotlight: Regulatory & Policy Update
The “Regulatory Spotlight: Regulatory & Policy Update” session was conducted by John Kneiss, Director, Governmental Affairs, Stratas Advisors, who began with a look at key take-away points for Marcellus Shale production. Projecting “dramatic production growth from 2010 to 2018 with dips and valleys from crude oil price fluctuations,” Kneiss also forecast a “peak around 2020” and “steady output through 2030.” Even after 2030, he indicated, “Significant production declines were unlikely.” With current data, Kneiss estimates the Marcellus Shale to be a 100-year play and the Utica Shale to be an 80-year play.
Speaking of the nation’s natural gas liquids (NGL) export infrastructure getting organized, Kneiss noted, “Of the 600+ infrastructure projects included in our models, we see all purity product exports occurring via pipeline, rail, and marine terminals presently operating or under construction. Pipelines, storage facilities, tank farms, shipbuilders, tanker railcar makers, fractionation plant operators, and de-ethanizer developers will feed those export facilities.” He also added, “The US is now a net exporter of refined products, which was unheard of 10 years ago.”
In addition, Kneiss spoke of both federal and state policy and regulation, noting that on the federal level, Congress is limited in what it can do as the Republican-controlled Congress is impeded by a Senate Democrat filibuster and White House veto threats. However, he added to keep an eye on H.R. 351, which would speed up LNG exports and spoke of the Climate Action Plan, which pertains to emission controls of shale oil and gas wells.
Spotlight: To Market, To Market—Where Will The Production Go
In the “Spotlight: To Market, To Market—Where Will The Production Go?” session, Karen Kabin, Vice President of Business Development, Kinder Morgan Energy Partners, L.P., relayed that the crude oil price drop was good as it allowed the industry, which has seen huge growth in the last four years, “to catch its breath.” She stated, “The Northeast is rapidly becoming saturated with product, resulting in product value degradation. For producers to achieve the best netback, access to multiple consuming markets will be required.”
Access to multiple markets allow for opportunities for expansion. Kinder Morgan Energy Partners, the largest midstream energy company in North America, is investing well over a billion dollars each on midstream projects, such as Utopia East, which will take ethane and an ethane-propane mix from Ohio to Canada; Utopia West, which will transport natural gasoline from Ohio to Canada; and Utica Marcellus Texas Pipeline (UMTP), which will transfer propane, butane, natural gasoline, condensates and/or mixed NGLs from Pennsylvania to the Gulf Coast.
In addition, the Milford, IN, Diluent Rail Terminal provides a “near term solution by utilizing existing infrastructure,” according to Kabin. The terminal is not in use, but could be utilized to move light condensate and natural gasoline (diluent) to Canada. Also, Kabin noted, “Offloading facilities can be expanded as Utica and Marcellus production increases.”
Operator Spotlight: The Marcellus Evolution
In the “Operator Spotlight: The Marcellus Evolution” session, John Mollenkopf, COO, MarkWest Energy Partners, stated, “The evolution of the Northeast shales is a story still being written. The Marcellus and Utica Shale plays are an incredible resource, which is fitting since oil and gas began here.” He sees “great potential in the Marcellus,” especially with gas takeaway projects, reversals, and LNG exports as there are “more than enough NGLs to supply the Northeast.”
One of a handful of small companies that began in the northeast, MarkWest now operates 33 Marcellus and Utica facilities, with two major complexes located in Houston, PA and Majorsville, WV. Plus, MarkWest is constructing 18 new plants in the Northeast. The company saw its largest increase in volume in 2014 with a current processing capacity of 4.1 Bcf/d. MarkWest has invested $7.5 billion in the Northeast, which includes 1,000 miles of pipeline. In addition, its workforce grew by 925 employees in six years, from 476 in 2008 to 1401 in 2014, which was primarily in the Northeast.
Mollenkopf also spoke of some of the challenges in the Northeast and for the industry, including the “extreme engineering” needed in areas like West Virginia, where the ground isn’t flat and therefore creates challenges. For example, the company needed to make a flat spot 900 ft. above a road for one of its facilities.
Concerning the current downward spiral of gasoline prices, Mollenkopf relayed that he didn’t expect to see crude oil prices this low again in his lifetime. Noting that MarkWest’s assets in the Appalachian Basin are still seeing a high degree of profitability, Mollenkopf explained,” This wasn’t a matter of luck.” The company moved to the most economic areas, where wells still get drilled even when producers cut back.
Closing Spotlight: Sailing Ahead
During the “Closing Spotlight: Sailing Ahead” session, Hank Alexander, Vice President, Business Development, Sunoco Logistics, started by talking about the growth of the conference which relates to the industry. Alexander spoke of this year’s record conference attendance of more than 2,100 attendees and compared it to the early years of MUM, when it was much smaller and held in the Westin William Penn Hotel ballroom.
“More than 800,000 barrels per day of liquids will be flowing out of the Marcellus by 2016,” relayed Alexander, who noted that with this production growth, the message was to plan, think ahead, and build the infrastructure.
Looking at some of Sunoco Logistics’ NGL pipeline projects, Alexander explained, “Mariner East I has come to fruition after years in the making and is moving propane and ethane from the Marcellus Shale in Western Pennsylvania to the company’s Marcus Hook facility.” According to Alexander, the granddaddy of them all, Mariner East II, will feature 275,000 BPD of capacity for ethane, butane, and propane and will largely parallel Mariner East I. It is expected to be up and running in the fourth quarter of 2016. Combined, Mariner East I and II represent a $3 billion investment and are a local stimulus that provides a comprehensive takeaway solution for transporting Marcellus and Utica liquids to the Marcus Hook Industrial Complex, a world-class Northeast NGL hub, for processing.
The Marcus Hook facility is closer to the Marcellus than its Gulf Coast counterpart. Plus Alexander said there is only a 396-mile difference from the Marcus Hook facility outside Philadelphia compared to the US Gulf Coast (Houston Ship Channel) when shipping NGLs through the Panama Canal to the Far East. The price of moving product from Marcus Hook is minimal, 0.2-0.3 cents per gallon of product.
Alexander also relayed that the Marcus Hook Industrial Complex, a facility that sat idle 15 years ago, has positively affected Philadelphia through resurgence. The complex has utilized a strong labor force and acquired local government support. Noting there is “a lot of opportunity,” he concluded that the export market will be interesting to watch and relayed the importance of being well positioned.
Ranging from compressor companies to construction firms, around 160 exhibitors filled the convention center floor—all related to the midstream sector in one way or another. In addition, each attendee also received a MUM registration bag. Those bags contained information on the conference and Pittsburgh along with items such as the Northeast ONG Marketplace, a publication dedicated to the shale oil and gas industry. Exhibitor and ONG Marketplace owner, Tom Foster, who is a MUM veteran (this was his fourth year attending the show), expressed, “A lot of decision makers attend the Marcellus-Utica Midstream Show. It’s a great way to connect with them in just a few days.”
First-time MUM exhibitor, Groff Tractor & Equipment, Inc., offers a wide selection of new and used construction equipment for purchase along with maintaining a large rental fleet. Chelsea Smouse, Marketing Coordinator, Groff Tractor & Equipment, Inc., expanded, “We are a full line CASE CE and Wirtgen America dealer. We also carry Terramac, Takeuchi, Atlas Copco, Terex, and more. We offer 24/7 service and a multimillion dollar parts inventory to help service our customers. We have been in business for over 55 years and are your number one source for everything under construction.”
Jeff Hood, Regional Sales Director, Groff Tractor and Equipment, added, “We carry the Terramac Crawler Carrier, which is an awesome machine for working in the shale oil and gas industry. The Terramac can be outfitted with a number of different beds ranging from people carriers to dump beds. They are critical for supplying needs on pipelines. We featured our CASE and Terramac lines at the show.”
“MUM was well worth attending. We attended the conference to network and meet with companies that are working in the shale oil and gas industry. We offer an array of machinery and attachments that can be of service to these contractors. It was enjoyable to discuss the industry as well as how Groff Tractor can be of service to those working in it,” expressed Smouse.
In addition, Bolttech Mannings, an industrial service supplier, was another exhibitor at MUM. “Bolttech Mannings has become a leader in specialty industrial bolting and thermal technologies by providing highly productive and cost-effective solutions to the shale oil and gas industry, chemical processing, power generation, and the steel and mining industries for nearly 35 years,” explained Mark Miller, Director of Marketing & Sales Operational Excellence, Bolttech Mannings.
“Our midstream and downstream customers across all of the shale plays in the United States and Canada are very important to Bolttech Mannings. The MUM conference was an excellent opportunity to meet and discuss industry issues with our customers, operators, constructors, fabricators, and equipment manufacturers in a venue so close to our Pittsburgh service, manufacturing, and headquarters facility,” relayed F. Bryan Popp, Regional Sales Director, East Region & Turbine Services, Bolttech Mannings.
Exhibitor Dr. Christina Toras, Chair and Assistant Professor, Department of Professional Studies, California University of Pennsylvania (Cal U), was at MUM to promote Cal U’s land management programs that began this past fall. “The programs were designed to train individuals to work in the shale oil and gas industry as entry level landmen. Our research indicated that there were three major disciplines that were desirable as far as the industry is concerned. Those three are law, geology, and GIS. We created a program that combined these three disciplines in order to provide students with the skills and practical training that is needed to be successful,” explained Toras.
“The 100% online land management programs are designed for working professionals to pursue their academic goals while still working and tending to family obligations. The MUM Conference was the perfect venue for showcasing our new land management programs. Not only did I have access to key players in the oil and gas industry, but the attendees were genuinely interested in our offerings. In fact, several attendees mentioned how relevant our programs are to the industry and how important and innovative online offerings are in land management education,” added Toras.
Sherri Scott, Senior Marketing Manager of Conferences, Hart Energy, relayed, “The 2015 Marcellus-Utica Midstream Conference and Exhibition has been our largest attended midstream event. We are so pleased with the turnout of more than 2,100 attendees–up more than 300 from the 2014 event. The continued support from the industry and the Appalachian region for this conference the last six years has been very exciting. Although we are in a softer market, Hart Energy will continue to provide value to industry professionals and companies who are in need of current and accurate industry data, intel, and contacts.”
Next year’s Marcellus-Utica Midstream Conference and Exhibition is scheduled for January 26-28.
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 news delivery system–Shale Energy Business Briefing (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.