KENSINGTON: The hilltops in southwest Columbiana County are under attack.
Construction equipment is turning a former farm off state Route 644 in Hanover Township, about two miles east of Kensington, into a natural gas-processing facility that is scheduled to open in May. It is mostly a ground-clearing operation so far, said spokesman David Mashek.
But not for long.
A shale boom is under way in Ohio. Land has been leased. Nearly 190 wells have been drilled. Natural gas, oil and other liquids are being pumped from the liquid-rich Utica formation deep underground.
Now, Ohio is looking at billions of dollars invested in processing plants, pipelines and compression facilities — so-called “midstream projects” — to get those commodities to market.
Seven processing-separation plants for natural gas plus liquids and four pipeline networks are under construction in eastern Ohio. Their price tag, in excess of $7.2 billion, does not include interim facilities also starting to pop up in Ohio.
“You can bring [gas and oil] out of the ground, but it doesn’t do you any good until you can move it and get it processed and get it where it’s needed,” Terry Fleming, executive director of the Ohio Petroleum Council, said. “Midstream is the key. It is critical. ... It’s an infrastructure issue. You can only pull as much out of the ground as you can transport and process.
“What’s happening in Ohio is big — and it’s going to get bigger.”
In addition to the new plants, eastern Ohio is expected to see an additional $5 billion in new pipeline projects in the next few years because the state’s existing network is too old and too small to handle the volume of gas and liquids that energy companies are tapping.
Getting such infrastructure built has made energy companies a little antsy because their wells increasingly are ready for production.
Some of the biggest drillers in Ohio, including Chesapeake Energy Corp., Gulfport Energy Corp. and EV Energy Partners, have commented in recent earnings reports that delays in completing the new midstream facilities are keeping Ohio shale development from moving forward.
Production will ramp up sharply in Ohio next year, however, as midstream pipelines and processing plants are completed, Chesapeake CEO Aubrey McClendon said.
Gulfport CEO James D. Palm said getting pipeline right-of-way from landowners in Ohio has been slow and difficult and has delayed work by its partners.
That’s the main reason only 45 wells in Ohio are in full production. Another 143 wells are drilled but not hooked up to pipelines and processing facilities.
Acquiring leases and drilling wells is known as the “upstream” end of the gas and oil business. Midstream operations begin with pipelines, processing plants and fractionation facilities that separate liquids from dry gas.
Payrolls for Ohio midstream companies are expected to top $1 billion annually by 2014, according to industry estimates.
Ohio’s natural gas — mostly methane — requires more processing because it contains such natural gas liquids as butane, ethane and propane that are all lucrative commodities after they have been removed from the natural gas. They are liquids below ground but are gaseous at the surface and are mixed with the natural gas.
Other impurities also must be removed from the natural gas before it can be pumped into large transmission pipelines.
Eastern Ohio projects
Three major gas-processing and fractionation projects are proposed in eastern Ohio: Columbiana-Harrison counties, involving three companies; Harrison-Noble counties, with MarkWest Energy Partners LP; and Mahoning County, involving two partner companies.
The Kensington plant will be part of a $900 million complex that consists of natural gas gathering and compression facilities there, plus processing, natural gas liquids fractionation, loading and terminal facilities at Scio in Harrison County, said George Francisco, a vice president at M3 Midstream, one of the project’s partners.
M3 Midstream will build and operate the two plants.
The plants — about 40 miles apart — will be connected by a 12-inch pipeline to carry natural gas liquids to Scio, in addition to a 24-inch high-pressure gas-collection line.
Cardinal Gas Service will build the network of 200 miles of pipeline at a cost of $1 billion.
The $400 million Kensington plant will employ 200 to 300 construction workers. When operational, it will retain 20 to 30 full-time workers.
Its 117-acre site was acquired for $1.8 million.
The cryogenic processing plant will rely on low-temperature distillation to cool the gas to minus-120 degrees Fahrenheit. It will be capable of handling 800 million cubic feet of gas per day.
The typical American family uses about 200 cubic feet of natural gas daily.
The Scio plant, on about 100 acres, also is scheduled to open in May. The $500 million plant will employ 300 to 400 workers during construction and 25 to 30 workers once operational.
Last week, Genesee & Wyoming Inc. announced that its wholly owned subsidiary, the Columbus & Ohio River Rail Road Co., has signed a long-term agreement to haul the natural gas liquids from Scio. The railroad will construct a mile-long rail siding and rehabilitate a 3-mile storage track.
Plans call for shipping 10,000 carloads of natural gas liquids from Scio annually.
Dominion Resources Inc., a subsidiary of Dominion, signed an agreement with M3 Midstream to hook up Utica wells and to transport the gas to the Kensington plant. That pact calls for up to 180 million cubic feet per day coming from Dominion Resources.
Chesapeake Midstream, another partner in the project, this year built 45 miles of Utica-related pipeline in Ohio, spokesman Pete Kenworthy said. In 2013, additional gathering lines will be constructed to connect wet and dry gas production sites to third-party pipelines and processing plants, he said.
Farther to the south, Colorado-based MarkWest has plans for gas-processing facilities in Harrison and Noble counties. Its subsidiary, MarkWest Utica EMG LLC, signed an agreement to develop the midstream project with the Texas-based Energy & Minerals Group.
In mid-November, it started up an interim processing facility in Cadiz in Harrison County. The refrigeration system can handle up to 60 million cubic feet of natural gas per day.
Two new cryogenic processing plants are under construction in Cadiz. Together they will be able to handle up to 325 million cubic feet of natural gas per day.
The first unit could begin operations in January, the second unit in September.
What’s planned for Phase 1 is a $500 million plant in the village of Cadiz’s industrial park, said Randy S. Nickerson, MarkWest’s senior vice president and chief commercial officer.
The company paid about $1 million for 207 acres and purchased an old bank building for its regional office.
The MarkWest team has signed a contract with Oklahoma-based Gulfport Energy Corp. to process natural gas and liquids from its Ohio wells.
The company has drilled 12 wells in Ohio with two more in the works. It intends to add 50 Ohio wells in 2013.
Gulfport already boasts the three top-producing wells in Ohio, in Belmont and Harrison counties.
MarkWest has provided Gulfport with a small temporary processing plant at one high-producing well in Harrison County to begin production.
The complex in Cadiz also will include a de-ethanization facility, where ethane will be removed from the gas stream and delivered into the new ATEX Express ethane pipeline.
That pipeline will run 1,230 miles from Pennsylvania to the Gulf Coast and is under construction in Ohio.
The propane and heavier natural gas liquids will flow via pipeline to a new Harrison County fractionation plant for further separation. That plant is expected to open in early 2014. A marketing facility also would be added.
On Nov. 6, MarkWest Utica EMG and Colorado-based Antero Resources announced plans for a new gas-processing plant in Noble County.
Initially, MarkWest Utica will operate an interim refrigeration gas-processing plant at its Seneca processing complex, to be built on 200 acres near Summerfield. It will be capable of handling up to 45 million cubic feet per day when completed in the second quarter of 2013.
That will be followed by the new Seneca I, a cryogenic gas-processing facility capable of handling 200 million cubic feet per day. That is expected to be in operation by the third quarter of 2013.
The agreement also calls for Seneca II, a 200 million cubic-feet-per-day cryogenic facility that could open in late 2013.
Antero has leased about 60,000 acres in Ohio. It is running one drilling rig and plans to add a second next year. It has permits for five wells in Noble and Monroe counties.
MarkWest expects to have constructed 60 miles of steel-coated pipelines in Harrison, Guernsey and Belmont counties by the end of this year. It expects to be up to 140 miles by the end of 2014. Antero is building the needed pipeline in Noble County.
Before the completion of the fractionation complex in Harrison County and associated pipelines, Antero’s natural gas liquids from Noble County might be transported to Pennsylvania or Kentucky for further processing.
MarkWest says it has invested $2 billion in the past four years in the Marcellus shale in Pennsylvania and West Virginia.
In Mahoning County, NiSource Gas Transmission and Storage’s Midstream and Minerals Group LLC and its partner, privately owned Hilcorp Energy Co., have announced plans to spend between $1 billion and $1.5 billion on a new Utica processing network: the Hickory Bend project.
That includes a $300 million pipeline that runs through Mahoning County and a natural gas processing plant at an unspecified location in eastern Mahoning County, spokeswoman Chevalier Mayes said.
The 50-mile gathering pipeline for wet gas would run through Northeast Ohio and northwest Pennsylvania. The pipeline — from 20 to 24 inches in diameter — would handle up to 400 million cubic feet of natural gas per day.
The cryogenic natural gas liquids processing plant should be completed in the third quarter of 2013 and would handle up to 200 million cubic feet of natural gas per day, NiSource President John Bonn said at a September shale meeting in Youngstown.
NiSource Midstream is a subsidiary of Indiana-based NiSource Inc., the parent company of Columbia Gas. Hilcorp is based in Houston, and has one investor: Jeffrey Hildebrand. Together they have created Pennant Midstream Services LLC to build the pipeline and plant.
The two companies are also undertaking a joint venture to drill natural gas wells in the Utica shale with Hilcorp operating the combined 100,000 acres, Mayes said.
The pipeline and plant, to be operated by NiSource, will be marketed to other drillers, she said.
The wet gas-gathering system is expected to start initial service early next year and the processing complex will be online by late in the third quarter of the year.
Said Joseph A. Blount, president and chief operating officer of NiSource Midstream and Minerals Group and president of Pennant Midstream LLC: “We are off to a great start on the Pennant project.”
Bob Downing can be reached at 330-996-3745 or email@example.com.