Oil & Gas Financial Journal
Ethane disposition poses a risk for Marcellus production

Friday, September 10, 2010

Producers in the Marcellus shale may be forced to curtail natural gas production unless they can come up with a viable way to dispose of ethane, an associated gas, according to a new study from BENTEK Energy. The report assesses the magnitude of the ethane problem, examines several projects designed to address this issue, and proposes a framework for assessing the viability of each of the options.

In most natural gas producing regions, ethane is a highly-valued byproduct of natural gas production, sold as an important feedstock for the petrochemical industry. But in the rapidly growing Marcellus producing region of the Appalachian basin, ethane is viewed by some natural gas producers as a contaminant that could threaten development plans in the area.

Natural gas production in the Marcellus shale is increasing rapidly. In Pennsylvania alone, receipts into pipeline systems have increased four-fold from 0.3 bcf/d (billion-cubic-feet per day) in early 2009 to 1.2 bcf/d in August 2010. Over the next five years Marcellus production is expected to reach at least 5 bcf/d, with some projections exceeding 10 bcf/d.

As Marcellus volumes continue to ramp up, a serious problem is emerging for producers of high-BTU (British Thermal Unit), or “rich” gas. Before this gas can be delivered to pipelines for transportation to market, natural gas liquids (NGLs) must be extracted from the gas. Of the hydrocarbons that make up NGLs in this region, ethane is by far the largest by volume.

“In most gas-producing regions, high-BTU gas and abundant NGLs are good news,” says E. Russell (Rusty) Braziel, BENTEK managing director.

Read Braziel's August article about drilling budgets shifting to high BTU gas and oil.

“NGLs are generally priced significantly higher than natural gas on a BTU equivalent basis, and improve the producer’s profitability at the wellhead. But in the Marcellus, NGLs are a problem for two reasons. First, today there is not enough gas-processing infrastructure to extract all the NGLs from gas in the high-BTU gas regions of the Marcellus. This problem is being addressed by the construction of a number of new gas plants. But these plants are creating the second problem – increasing volumes of ethane in the Marcellus region. There are essentially no markets for ethane in the Northeast US.”

To read the complete article, click here.