MarkWest's Cadiz complex.
MarkWest Energy Partners LP has 18 projects under construction in the three-state Appalachian region that makes up the Utica and Marcellus shale plays.
While oil and gas drillers are reining in activity in Ohio, West Virginia and Pennsylvania, the Denver-based natural gas midstream company (NYSE:MWE) is ramping up activity.
Here's why Utica shale heavyweight MarkWest keeps growing
MarkWest's Cadiz complex.
MarkWest Energy Partners LP has 18 projects under construction in the three-state Appalachian region that makes up the Utica and Marcellus shale plays.
While oil and gas drillers are reining in activity in Ohio, West Virginia and Pennsylvania, the Denver-based natural gas midstream company (NYSE:MWE) is ramping up activity.
Drillers have taken a step back since late 2014 as commodity prices have tumbled. But companies like MarkWest, which operates pipelines, fractionation plants and other equipment related to the delivery and processing of gas, still are building.
That’s in part because its pipelines and associated facilities have long-term agreements with oil and gas producers who already have drilled more than existing pipelines can take away.
MarkWest has spent billions in Ohio and the surrounding states, and has plans to spend more. It’s finalizing three major Ohio plant expansions: a 60,000 barrel-a-day expansion of its Hopedale fractionation plant; adding a third plant with 200 million cubic feet a day of capacity to its cryogenic facility in Cadiz; and a fourth plant with 200 million cubic feet of extra capacity will be added to its Seneca processing complex in Noble County.
“Given the market conditions currently, this will give us plenty of capacity to meet all the immediate needs,” David Ledonne, MarkWest’s VP of Utica and Appalachia operations, told me.
But MarkWest also is taking a long view – if prices become more stable and drilling picks back up in a few years, it will be ready.
“We are looking as far ahead as two to three years,” he said.
So, how much more could MarkWest’s expand if necessary?
“I’d love to be able to tell you, but I’m now allowed,” Ledonne said from the company's new administrative building in Cadiz.
The downturn has allowed MarkWest to stop playing catch-up. Even today, many wells in the area are drilled but not completed.
When the Ohio shale industry was booming, the most common problem expressed by drillers was a lack of infrastructure to transport and process the oil and gas.
Today MarkWest is pacing itself to match producers’ drilling schedules.
“There was a little lag time initially. Now that we’ve seen a slowdown because of market dynamics we’re seeing ourselves in a pretty good spot,” he said.
Ledonne, like most in the industry, sees opportunity for growth if the ethane cracker in Belmont County is built (two others in Pennsylvania and West Virginia could be constructed, too). It could be a “huge impact” for MarkWest, he said, if the company becomes one of the companies that provides some of the natural gas feedstock for the cracker plant, which will be run by a Thai-based company called PTT Global Chemical Public Company Ltd. and Japan’s Marubeni Corp.
“It’s a new source of opportunity for the producers to supply ethane from gas we’re processing,” he said.
