Mitchell exploits synergies of gas processing, E&P businesses

Synergies in the gas processing and exploration and production businesses have allowed Mitchell Energy & Development Corp. to grow into the front ranks of both industry segments. A companywide drive to move gas to market has boosted Mitchell to the 13th largest US gas liquids producer and to the top 25 gas producers

By Alan Petzet
Chief Editor-Exploration and Economics
Oil and Gas Journal

HOUSTON, Apr. 11 -- Most US exploration and production companies long since gave up the gas processing (GP) business, but synergies in the two businesses have allowed Mitchell Energy & Development Corp. to grow into the big leagues of both industry segments.

A companywide drive to move natural gas to market has boosted both Mitchell�s E&P and GP segments, propelling the company to the 13th largest natural gas liquids producer in the US and to among the top 25 gas producers, said Allen J. Tarbutton, president, Mitchell Gas Services LP.

E&P companies handle only about 20% of US gas gathering and processing today, compared with 80% in the early 1980s, Tarbutton told the Gas Processors Association Houston Chapter Wednesday.

Mitchell, while emphasizing the movement of gas to market at all levels internally, has changed its external focus several ways in recent years.

Based in The Woodlands, Tex., with its business solely in Texas, Mitchell operates six gas processing plants and produces 53,000 b/d of NGL, compared with 49 plants extracting 45,000 b/d in 1985. The transition was from small, portable plants without gathering systems in the 1970s to large plants that process gas produced by Mitchell and third parties. The cost to build and maintain those plants became prohibitive.

Its 9,100 miles of gas gathering lines include 7,100 continuous miles in 21 North Texas counties where it gathers about 300 MMcfd.

It has had to expand facilities to keep up with growth of its gas production from low-permeability Barnett shale in the Fort Worth basin, its main core area. Atoka conglomerates were Mitchell�s former focus in that basin.

Mitchell knew since the 1960s that the Barnett contained large gas volumes but did not know how to extract it economically because of low porosity and permeability. In the past year it solved that problem with �light frac� stimulations that use massive volumes of water and small volumes of sand, then slashed the cost of drilling and fracs.

In East Texas� North Personville area, Mitchell shifted emphasis from Cotton Valley lime gas to the Bossier gas and condensate play in which Anadarko Petroleum Corp. has had great success, Tarbutton said.

In East Texas� Lake Creek field, shallow Yegua sand development was followed by deeper Wilcox gas discoveries.

Gas marketing emphasis has evolved from the Chicago area originally to the Dallas-Fort Worth and Houston Ship Channel areas. Mitchell ships gas from central and eastern Texas to the Katy, Tex., plant, where it extracts 12,000-13,000 b/d of NGL.

Company-wide Mitchell handles almost 1 bcfd of gas and extracts 78,000 b/d of NGL, Tarbutton said.

The company�s conservative approach -- it does not take undue risks, has a small marketing staff, works with arbitrages, and does no futures trading or speculating -- has worked well.

Because of its dual orientation, times of high gas and NGL prices do not cause the conflict for Mitchell that they do for other gas producers. The ability to process gas whenever needed helps the E&P side because many gas producers have found out in recent months that a lot of pipelines will not take unprocessed gas, Tarbutton noted.

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