M-U Industry Asks Feds to Use M-U Butane to Stretch Gasoline
The leaders of the Marcellus Shale Coalition, Kentucky Gas and Oil Association (KGOA), Gas and Oil Association of West Virginia (GO-WV) wrote a letter to Washington, D.C. last week encouraging the federal government (i.e. Joe Biden) to allow butane blending with gasoline as a great way to lower prices at the pump. But the groups didn’t send the letter to Joe Biden, knowing it would get filed in the circular file next to Biden’s desk. Instead, they sent the letter to another Joe–U.S. Senator Joe Manchin from West Virginia. Manchin, chairman of the powerful Senate Energy and Natural Resources Committee, has the attention of the Bidenistas since he torpedoed the administration’s Build Back Worse plan last December. If Joe Manchin talks about something, Joe Biden pays attention (if he isn’t napping).
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As we told you last week, Energy Transfer, during its first quarter update, spoke about the now-completed Mariner East pipeline system that flows NGLs, including ethane, propane, and butane, from eastern Ohio and southwestern Pennsylvania all the way to southeastern PA and the Marcus Hook terminal (see 
U.S. Senator from West Virginia Shelley Moore Capito “Zoomed” in to address the Gas and Oil Association of West Virginia’s (GO-WV) annual winter meeting last week. She talked about the Biden infrastructure bill, which she supported, and Biden’s so-called Build Back Better bill, which she does not support. As part of her comments, Capito mentioned the $1.2 trillion infrastructure bill includes money for “an Appalachian ethane/hydrogen storage hub.” Wow! We thought that project was long dead.
Our friends at NGI (Natural Gas Intelligence) are running an excellent series providing expert forecasts for the global natural gas and oil markets in 2022. The latest installment interviews several experts about the prospects for the Marcellus/Utica. With the Shell ethane cracker plant coming online sometime this year, the prospects for NGL sales in the M-U have picked up. Also in the discussion: capping Pennsylvania’s orphaned wells, drilling in the Wayne National Forest, and the Mountain Valley Pipeline coming online.
BCCK Holding Company (BCCK) has been granted a contract to upgrade a cryogenic gas processing plant in the Marcellus/Utica, in southeastern Ohio. The name of the customer was not disclosed but we’re guessing it is MarkWest Energy (now MPLX). BCCK says it has developed a simple and effective modification to improve the existing cryogenic plant design and equipment with the aim of increasing propane recovery.
According to the experts at RBN Energy, “If there was ever a year that proves NGLs march to the beat of a different drummer, 2021 was it.” Production of NGLs went *up* during the pandemic, not down. Prices have been up, down, and all around. Like all oil and gas markets (markets of any kind, really), there is no one, specific factor or reason why NGL production and prices are doing what they are doing. It is a complex soup of factors that affect the NGL market–a market that’s increasingly vital for Marcellus/Utica producers.
Earlier this month MDN exclusively broke the news that earlier this year (slipping under the radar) the Ohio Department of Natural Resources (ODNR) issued permits to Powhatan Salt Company/Mountaineer NGL Storage for three planned solution mining wells in Monroe County (see 
Three weeks ago MDN told you that propane prices at both the wholesale and retail level were going through the roof (see 
On August 30, the Ohio Department of Natural Resources (ODNR) issued permits to Powhatan Salt Company/Mountaineer NGL Storage for three planned solution mining wells in Monroe County. The three salt caverns will store NGLs (natural gas liquids, mainly ethane) to potentially be used by ethane crackers including the Shell cracker near Pittsburgh and potentially a second ethane cracker proposed by PTT Global Chemical in Belmont County. The salt caverns can also be used to store hydrogen (H2).
According to the U.S. Energy Information Administration, high global demand and low global supply are contributing to the rapid increase in U.S. propane spot prices. At one point last year, propane spot prices averaged just above $0.20 per gallon. Right now it’s averaging $1.33 per gallon!
The federal Pipeline and Hazardous Materials Safety Administration (PHMSA) recently issued a “warning letter” to Shell concerning the company’s ethane pipeline, called the Falcon Pipeline. PHMSA claims the pipeline committed two “probable violations” by failing to place pipeline sections at a construction site in Beaver County on protective padding. PHMSA told Shell to fix it, or else.
Have you ever noticed how politicians like to “study” things? Why is that? We suppose the results of all those studies gives them political cover to make unpopular votes on key issues. The U.S. Department of Energy’s Office of Fossil Energy and Carbon Management is in the process of conducting a study on the prospects for a petrochemical industry in the Marcellus/Utica. As part of that study, DOE held an online/virtual hearing yesterday to elicit comments on the environmental, health and community impacts of the petrochemical industry from ethane crackers and pipelines. In what appears to be a put-up job, a dog and pony show, the hearing was packed with radical anti-fossil fuel nuts who bashed away at the shale industry.
During the second quarter (May through June), ten of the largest oil and gas producers covered by S&P Global Market Intelligence saw their NGL (natural gas liquids) revenues grow substantially from the same period a year ago. Those ten companies, half of them drillers in the Marcellus/Utica region, saw NGL prices increase from 104% to as high as 261%. The extra money from NGLs made what turned out to be a down quarter financial-wise (because of bad bets on hedges) better than it would have otherwise been.
When drillers for natural gas sink a hole and methane (CH4) begins to come out of the ground, a number of other hydrocarbons come out of the ground along with it–at least in “wet gas” areas. Those other hydrocarbons include ethane (C2H6). Ethane production in some M-U wells goes as high as 6% or more of the hydrocarbons coming out. For years ethane has been a waste product, something drillers pay to dispose of–typically by “rejecting” it and slipping it into the methane stream. Increasingly ethane, which is now trading at its highest price in two-and-a-half years, has become a profit center. Why? Because it’s used to make plastics.