Natural gas wells are popping up in Wetzel, Tyler, and Marshall Counties like mushrooms after a spring rain. The next phase of Marcellus Shale gas development will be transporting the product to the buyers-putting the product online. Who are the major companies involved in the gas gathering process, and where will the lines be located?
Where are the lines?
"The state has more pipeline than it does highways," said James Crews managing director for Appalachian supply for Columbia Gas Transmission and president of the West Virginia Oil and Natural Gas Association. Crews made the observation at a September 2010 pipeline groundbreaking in Tyler County. There are hundreds of active wells in the tri-county region and tens of thousands of miles of pipeline in West Virginia, connecting wells to gathering lines and processing plants, like the new one at Beeler Station near Cameron, and to compressor stations such as the proposed one on W.Va. Route 7 near Knob Fork. Some lines will be new to accommodate the high pressure volume of the wet shale gas, but wherever feasible, companies will use existent lines or refurbish older ones.
Who are the
Because they connect the producer with the buyer, pipeline and associated gathering businesses are known as "midstream services." Caiman Energy LLC, Dominion Transmission, Columbia Gas Transmission, Equitrans (EQT), Williams Energy, Eureka (Magnum) Hunter, Grenadier Energy Gathering, Texas Eastern (TETCO), and MarkWest Liberty Midstream & Resources all have interests in the Wetzel-Tyler-Marshall area. Sometimes producers such as Tyler County based Drilling Appalachian Corporation (DAC) will drill their own vertical wells, partner with another company such as Grenadier for Marcellus horizontal deep drilling, and then hire local contractors to build portions of their own line to connect to another line. Several different companies may use one line, with each paying the primary lease owner for the use of the line; leaseholders may sub-let pipeline rights-of-way and build new parallel lines.
In Wetzel County a company that has recently made the news is Texas-based Caiman Energy LLC. Caiman does not drill to produce the gas; rather its primary business is gathering, processing, and delivering marketable gas from northern West Virginia to Texas Eastern Transmission Pipeline for delivery to the northeastern United States. Caiman has already invested $150 million in Marshall and Wetzel counties, and will spend a total of $400 million by the end of 2011. Caiman has completed 60 miles of gas lines in Marshall and Wetzel counties with 60 additional miles to be completed in 2011.
One Caiman processing plant employing 10 workers is already operating. On U.S. 250 near Beeler's Station and Cameron the Fort Beeler Processing Plant I opened in January. With a capacity of 120 million cubic feet per day (mmcf/d), the plant receives the rich, high BTU raw gas from the Marcellus fields via pipeline, removes the natural gas liquids by chilling the base material, and later processes it into natural gasoline, butane, purity propane, ethane, and other products. Caiman on January 26 announced the construction of a second cryogenic facility to be completed by the end of 2011, with plans for a third in the near future.
In the same press release, Caiman Energy president and CEO Jack Lafield stated, "We are committed to meeting the needs of our dedicated producer base. There are 10 rigs currently running on dedicated acreage in our rich gas areas. To meet our customer's expanding requirements for infrastructure, we expect to have total processing capacity of 520 million cubic feet per day (mmcf/d) online by the second half of 2012." This means an invested total of at least $400 million in Marcellus shale infrastructure midstream services by Caiman by the end of 2011.
In addition, Caiman has partnered with Chesapeake Energy (NYSE: CHK) to process a large volume of gas and has dedicated acreage from other producers in excess of 160,000 acres in the Wetzel-Marshall area. As one of the most active midstream operators for Marcellus gas in Appalachia, Caiman now claims nearly 500,000 acres dedicated to its operations. Caiman has also announced agreements with Drilling Appalachian Corp., Stone Energy, Grenadier Energy Partners, and AB Resources among others. Chesapeake is the second largest natural gas producer in the United States.
Ultimately, the natural gas liquids will be transported via a 25-mile pipeline to a new 12,500 barrels per day (bbl/d) fractionation facility to open in June 2011 on the Ohio River near the Wetzel-Marshall border. The 12 employees at the fractionation plant will separate the processed gas into purer forms of propane, butane and natural gasoline. The new facility will offer barge, rail and truck loading facilities to support transportation of these products to high value markets.
One of the most familiar local companies, Dominion Transmission, who gathers, processes and stores natural gas at several locations including its Hastings plant in Wetzel County, is developing the Appalachian Gateway Project. According to a Pipelines International press release, Dominion will construct 110 miles of 20 to 30-inch diameter pipeline between West Virginia and Pennsylvania, in addition to completing four new gas compressor stations, at a cost of $600 million. Construction is expected to start in 2011, with transportation services to begin by September 2012. Dominion maintains 7,800 miles of gas line in six states including West Virginia, and has plans to expand its Hastings facility. Dominion also announced on January 12 the construction of a new fractionation facility on a 56-acre tract in Natrium near PPG on the Ohio River.
Other midstream companies such as MarkWest and EQT are proposing more pipelines, and their construction will depend on the signing of right-of-way agreements and overcoming geological difficulties. The future of pipeline construction in the Ohio Valley rests heavily on the development of Marcellus Shale, which by all predictions looks to be viable for another 30 years or more. A recent West Virginia University study indicates in 2002 only one Marcellus Shale permit for well drilling was issued by the West Virginia Department of Environmental Protection. By 2008 the number had climbed to more than 800 permits.