New NGL hub for Utica and Marcellus

The Utica shale formation spans an area from Ohio to Pennsylvania, into New York, across the Canadian border, and into two Great Lakes (Erie and Ontario). The Utica shale takes its name from the city of Utica, NY, where it outcrops and appears on the surface. It was first identified along Starch Factory creek near the town of Utica.

In Canada, the play is found along the St. Lawrence River and the adjacent lowlands. The Utica shale lays thousands of feet below the Marcellus shale and is proving to hold impressive quantities of oil, natural gas, and natural gas liquids. Some geologists believe the Utica shale could rival the massive Marcellus shale in terms of oil and gas potential.

Currently, the biggest issues in the Utica are related to midstream and transportation infrastructure.

Utica and Marcellus get new NGL hub

Over the next couple of years, almost 500 MB/d of new fractionation capacity will be built in the region encompassing the Utica and Marcellus shale plays. Sometime in 2016 or sooner, Houville will blast past Conway as the second largest Y-grade hub in the country, exceeded only by Mont Belvieu in Texas.

By the end of 2014, the northeastern US will go from about 100 MB/d of NGL fractionation capacity to nearly 600 MB/d. That's because wet gas production is growing by leaps and bounds in both the Marcellus and Utica, and the processing, transportation, and fractionation infrastructure is trying desperately to keep up with production.

RBN Energy reports that, "Producers are aggressive and willing to partner with midstream companies to ensure their production is interrupted as little as possible. The vast majority of these midstream deals are supported by long-, fee-based agreements."

There are lots of producers waiting anxiously to maximize netbacks on their production of NGLs, some of which is ethane now being rejected, or other products being transported long distances for fractionation, storage, or simply to find a market. RBN Energy notes, "NGLs aren't of much value until they are fractionated (i.e., split) into purity products: ethane, propane, normal butane, isobutane, and natural gasoline. There is a very long history of processing and fractionation in the region, but nothing like the scale of what is happening now."

MarkWest Utica EMG, PDC sign long-term agreements

MarkWest Utica EMG LLC, a joint venture between MarkWest Energy Partners LP and The Energy and Minerals Group (EMG), has agreed with PDC Energy to provide gathering, processing, fractionation, and marketing services in the Utica Shale.

MarkWest Utica EMG expects to begin gathering and processing PDC's liquids-rich gas production from Guernsey County, Ohio by the end of the second quarter of 2013. Initial production from PDC's Utica operations will be processed at the Cadiz complex located in Harrison County, Ohio. In the second half of 2013, PDC's gas will be transported via MarkWest Utica EMG's high-pressure rich-gas header system to the Seneca complex located in Noble County, Ohio for processing.

Early in 2014, MarkWest Utica EMG, and MarkWest are expected to complete their 100,000 barrels per day of C2+ fractionation capacity in Harrison County, Ohio that will include extensive marketing access by truck, rail, and pipeline. When completed, MarkWest Utica EMG and MarkWest will have the largest processing and fractionation capacity in the Utica Shale. The fractionation facility will also be connected by an NGL pipeline to MarkWest's extensive NGL infrastructure in the Marcellus Shale and to its Houston, Pennsylvania complex, the largest fractionation and marketing facility in the Northeast.