American Oil and Gas Reporter - July 2015 - 116

SpecialReport: Marcellus/Utica Update

Midstream Adjusts For Emerging Utica
By Al Pickett
Special Correspondent

Will the emerging development of
deep Utica Shale wells across Pennsylvania, West Virginia and Ohio be aided
by midstream infrastructure built for the
Marcellus Shale in roughly the same area?
"It depends," answers Joe Fink, chief
operating officer of CONE Midstream
Partners, a master limited partnership
created last September by CONSOL Energy and Noble Energy, a couple of years
after the two producing companies formed
a joint venture to develop the Marcellus.
"There is a really nice marriage between the dry Utica and the dry Marcellus," Fink remarks. "Developing the
deep (dry gas) Utica in the wet regions
of the Marcellus will require an entirely
new gathering system. Generally, the
only thing the two developments have in
common is the land lease for rights of
way. There will be synergies with their
water systems, and perhaps some shared
utilities or unused station ground, but for
the most part, each is unique and the gas
cannot be commingled."
He says economics won't allow dry
Utica gas to be placed into a wet gas
gathering system. "What a change," he
exclaims. "While many operators were
focused dominantly in wet areas of the
Marcellus, operators with diverse wet/dry

drilling programs will have a step advantage in both speed and cost in developing
the dry Utica. It can provide a second life
for our dry Marcellus gathering systems."
Whether the existing infrastructure
can help development of the Utica may
be questionable, but there is no denying
the midstream segment of the industry is
going to play a huge role in developing
both the Utica and Marcellus plays.
"Right now, there is a shortage of capacity," offers Stephen Arata, the new
chief executive officer of Blue Racer
Midstream. "There are a lot of projects
under way: more than 20 billion cubic
feet a day of new take-away capacity.
This is all driven by projections. We
forecast that in the next 10 years, U.S.
demand for natural gas will be 100 Bcf/d,
which is 25 percent more than today.
And 40 percent of that will come from
the Marcellus and Utica."
The challenge for midstream companies, according to Arata, is to stay ahead
of production, but not too far ahead. "We
always try to keep things in balance," he
emphasizes. "Most of the gas we handle
has to be processed to pipeline quality.
But we don't want low utilization of our
system."
Joint Venture
Caiman Energy II and Dominion Resources Inc. came together in a joint ven-

Blue Racer Midstream's Natrium natural gas processing and fractionation facility, which
is located on the Ohio River in Marshall County, W.V., has a processing capacity of 400
million cubic feet of natural gas a day. The facility's 123,000 bbl/d fractionator strips the
ethane, propane, butane, propane and natural gasoline from the Y-grade natural gas
stream fed into the plant.

116 THE AMERICAN OIL & GAS REPORTER

ture two-and-a-half-years ago to form
Blue Racer Midstream. Caiman Energy I
sold its Marcellus rich gas gathering and
processing system to Williams Partners
in April 2012, and the Caiman management team formed Caiman Energy II
later that year, according to Arata.
"The Utica was just starting, and we
thought there was room for another midstream player," he explains.
Caiman Energy contributed capital
and midstream expertise, and Dominion
contributed assets, including a 500-mile
gathering system and the Natrium natural
gas processing and fractionation facility
in Marshall County, W.V., which was
under construction when the two companies completed the joint venture. Arata
says Blue Racer repurposed the gathering
system to accommodate large volumes
of rich gas production, made substantial
expansions to its initial footprint, and increased processing and fractionation capacity.
Today, Blue Racer's gathering and
processing "super system" serves nearly
all of the Utica and portions of the Marcellus' rich gas fairway in the panhandle
of West Virginia. He says Blue Racer's
gathering system spans 13 Ohio counties
and extends into Wetzel County, W.V.
The company's gathering system can
move more than 2 Bcf of natural gas a
day. Arata says Blue Racer has 650 miles
of pipe in its system, with another 200
miles under construction. The company
has 800 million cubic feet a day of processing capacity today, and expects to
add more in 2016. Arata mentions that in
addition to the Natrium facility, Blue
Racer also operates its Berne natural gas
processing plant in western Monroe County, Oh.
"All our customers can deliver gas
into any part of our system," he says.
"This enables them to deliver their product
to any pipeline for processing at any of
our facilities. We provide our customers
with optionality so they can get their gas
to more than one market, and have the
ability to get the highest possible net
back. "
Arata says the fractionator at its 123,000
barrel-a-day Natrium facility on the Ohio
River strips the ethane, propane, butane,
propane and natural gasoline from the
Y-grade stream.
"We help arrange markets for our pro-



American Oil and Gas Reporter - July 2015

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