Wednesday, March 23, 2011

NGL’s Cause Bottleneck in Marcellus Shale

As more gas wells are drilled into the Marcellus Shale, more pipelines to carry the gas to market are being laid by companies that specialize in what is known as the “midstream.” However, during this week’s Marcellus Midstream conference at least one investment banker thinks there is a missing component.

When natural gas comes out of the ground it is usually known as wet gas because as much as 20% of it is made up of compounds other than methane. Before the gas can be put onto interstate transport lines and eventually pumped into your home it must be separated. Mark Huhndorff is a Managing Director at the investment firm Raymond James and Associates. He says not being able to process or transport Natural Gas Liquids or NGL’s is causing a bottleneck in the Marcellus Shale. “The options are to build more processing plants or to take the NGL’s and transport them down to processing plants located elsewhere,” says Huhndorff.

The bulk of the NGL processing facilities in the US are in the Gulf Coast. “You pick anybody that’s involved in the Marcellus midstream [and they are] looking at that as a need,” says Huhndorff, “To address that need they are either going to build takeaway pipelines or a processing plant.”

Huhndorff says he has seen continued strong investment in midstream infrastructure in the Marcellus Shale and he expects it to continue. He says he thinks there is a great deal of money to be found in the capital markets that would be interested in backing such investments.

Among the compounds processors get when they process wet gas is ethane. Ethane has long been used as a feedstock for petro chemicals. Entrepreneurs are looking for ways to use the ethane to run equipment used in the gas fields including compressors. Propane, butane and hexane are also often found in wet gas.

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