A pipeline project that could eventually transport up to 190,000 barrels of ethane daily from Appalachian shale fields to the Texas Gulf Coast has secured enough customers to move forward, Enterprise Products Partners announced Tuesday.
The Houston company, which revealed two months ago that it had lined up its first long-term contract to use the pipeline, now says it has enough in place to make the project financially feasible. The 1,230-mile line is expected to begin pumping in early 2014, taking advantage of increased production of natural gas liquids and their lower price relative to oil-based alternatives.
“The willingness of shippers to commit to a term of at least 15 years reflects the long-term potential of shale development in the Appalachian region and provides us with the assurance necessary to build the midstream infrastructure that will facilitate further development of this important domestic resource,” Enterprise president and CEO Michael Creel said in a statement.
In November, Enterprise announced it had signed up Oklahoma City-based Chesapeake Energy Corp. for the pipeline. A company spokesman on Tuesday declined to identify any of the newly signed customers or detail how much ethane they committed to purchase.
However, energy analyst Darren Horowitz of Raymond James & Associates said it appears the project will begin operations with four to six customers committed to a combined capacity of 75,000 barrels a day.
At that rate, he said, Enterprise could realize a 10 to 12 percent return on a project heestimated to cost $1.2 billion to $1.3 billion. The company didn’t disclose the cost.
Should industry demand continue to grow as forecast into 2013, Enterprise could see additional return, Horowitz said.
In recent years, the Marcellus and Utica shale plays in Pennsylvania, Ohio and West Virginia have become a major hub for production of natural gas liquids. One of these, ethane, a liquid form of natural gas, is feedstock for ethelyne, which in turn is a base material for many plastic products.
Horowitz said demand for ethane reached 1 million barrels a day in December, one of the highest rates in a decade.
To complete the Appalachia-to-Texas project, Enterprise plans to build 595 miles of pipeline from Washington County, Pa., to Cape Girardeau, Mo., then connect to an existing 580-mile pipeline to Beaumont.
The latter is one of two parallel pipelines that move refined products from Beaumont northward, but Enterprise spokesman Rick Rainey said the other, larger line is sufficient to meet demand.
Enterprise also plans to build a 55-mile connector pipeline to Mont Belvieu, where it has a storage complex, and other lines to petrochemical plants along the Gulf Coast.
Rainey said the project is expected to generate about 4,000 construction jobs and broader economic benefits for the petrochemical and pipeline industries and the communities that depend on them.
ronnie.crocker@chron.com; twitter.com/rcrocker
why not build an ethylene/polyethylene complex in pennsylvania? the ethane should be real cheap if you discount by the amount of the pipeline tariff . this pipeline will cost over 3 billion
Not enough export terminals.
ChE – Where in the world did you come up with $3B? Only half of this system is new lay. And it’s 16″ (probably less than 1/3 the steel per mile vs. the XL 36″). EPCO already has the other 600 mi.
Unlike building new olefins plants up there, a pipeline could be reversed for pumping refined products to the NE, should the ethane market or supply change in the future. Remember that half their refining capacity is going away and Colonial et al may be maxed out.
Well this IS good news. Now if they will only hire American Citizens for all the work!!
Not only that…the hurdles that stand in the way are many. Lawsuits by environmentalist, environmental impact study mandated by EPA, the not in my back yard crowd would force interested companies to search for a remote location where bringing utilities and roads would be an additional expense, and the permitting process. By the time all of these were resolved the need for the complex might not be worth the expense.
I have no idea why Texas has to be the single hub for all this refining capability. Why not spread it around, lower the costs and generate some new money in new places? Single points of failure in any system are a BAD idea. So we end up shipping it here, refining it, and turning around and selling much of it to the northeast. Not smart and not efficient.
Appalachia to Texas? My first thought was moonshine.
Nope! Obama will have none of that – oil & gas business must die!
“I have no idea why Texas has to be the single hub…”
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Companies make investments in their own interests, for maximum ROI. Not what some central planner decrees. EPCO is using some of its own assets to keep p/l construction costs down. Local olefins plants maximize the return on their existing investments before they build new. Once it’s polymerized, pellets are easy to ship via cargo vessels.
They will ship it out to the south american countries and we will bare the mess it creates, the upper .01% will pocket the cash
How many permanent jobs will it create in Jefferson and Chambers Counties- JeffCounty is really struggling to find jobs for all the engineers and operators who are ready, willing, and able.
oldcheme – it’s cheaper to build a pipeline than to build a new refinery, gas plant, etc. Plus the regulatory landscape in Pennsylvania is insane. The unions forced all sorts of stupid things into the regulations.
Just scary.
Palerider is right – Obama will try to use the EPA to kill this pipeline, too.
Attack the red states.
Hmmm……jobs, investment opportunities for teacher, police, and firefighter retirement accounts, tax revenue to city, state, and federal coffers, etc., etc., etc.
Everything Obama hates.
“why not build an ethylene/polyethylene complex in pennsylvania?
I have no idea why Texas has to be the single hub for all this refining capability. Why not spread it around, lower the costs and generate some new money in new places?”
As your democrat politicians and the EPA why they won’t permit new facilities in the Northeast. Have you noticed how many closed in the past few years?
Yea! Bring on the jobs.
People don’t realize how big those refineries are…hugh complexes and more than one..located in the Houston area..(Baytown, Deer Park & etc.)
The reason they ship it here to Texas is that its impossible to permit new refineries in the US. The cost and time it takes to construct them relative to a new pipeline is very significant. It would probably take 10 years to get a new refinery in the northeast, yet they exist already here in Texas and we can add additional capacity to export the gas or use it here at home.