The Appalachian Basin now produces about 2.5 billion cubic feet of gas per day, but that number is set to rise dramatically in the future as more Marcellus shale wells are drilled in Pennsylvania, speakers said at Hart Energy's Marcellus Midstream Conference in Pittsburgh this week.

Some 2,300 shale wells have been drilled so far in Pennsylvania, according to officials, and the estimated resource, as much as 260 trillion cubic feet of recoverable gas, could make the play the second-largest gas field in the world after fields in Qatar.

Midstream master limited partnerships alone have committed more than $1billion to Marcellus infrastructure, according to Robert Lane, managing director in the energy investment banking group of Houston-based Madison Williams & Co.

"Investors love the Marcellus," he told some 1,400 attendees during the event at the David L. Lawrence Convention Center.

Gary Evans

"There's going to be a lot of natural gas. The U.S. has created a whole new natural gas industry and we can compete with anyone else in the world on petrochemicals, even China," said Gary Evans, chairman, president and chief executive of Magnum Hunter Resources Corp.

One bonus -- and challenge -- from the increased drilling activity is a rising supply of natural gas liquids that would be available to industry throughout the Northeast, and in Sarnia, Ontario, site of several petrochemical plants.

"Ethane is a cost of doing business, and an opportunity," he said.

"If I was running a petrochemical company today, I'd be looking at this part of the county, maybe locating somewhere along the Ohio River," said Gary Evans, chairman, president and chief executive of Magnum Hunter Resources Corp., which plans to drill 15 horizontal Marcellus wells in 2011.

"There's going to be a lot of natural gas. The U.S. has created a whole new natural gas industry and we can compete with anyone else in the world on petrochemicals, even China.

"We are working on a 200-year feedstock supply, the way things are going," Evans said.

Evans conceded the petrochemical industry does not move as fast as the E&P and midstream sectors of the energy industry do, but he believes that once petrochemical executives see the level of ethane that can be produced, "they'll put their thinking hats on."

"It is a changing world out there and there will be new and better deals cut."

By making a series of acquisitions, some of which have not closed just yet, Magnum Hunter has accumulated about 95,000 net acres in West Virginia, Ohio and Kentucky, with 56,600 net Marcellus acres included. The company also has acreage in Texas' Eagle Ford shale and the Bakken oil play in North Dakota.

Karen Kabin

Karen Kabin, director of business development for Kinder Morgan Products Pipelines, addressed some 1,400 attendees during Hart Energy's Marcellus Midstream Conference in Pittsburgh.

The company prefers an integrated approach with both E&P and midstream operations in house. In February 2010, Magnum Hunter acquired Triad Energy LLC and with it, the Eureka Hunter Pipeline gathering system in West Virginia, with a design capacity of 200- to 300 million cubic feet of gas per day.

It is in the heart of the wet-gas area of northwestern West Virginia. The company is proving up acreage along the pipeline route, and also, building a new cryogenic gas processing plant with a capacity of 200 million a day.

"We also hope to develop long-term relationships with other midstream companies for the future," Evans said.

Kinder Morgan Products Pipeline is developing the Marcellus Lateral Pipeline, a 248-mile line that will connect to the company's Cochin Pipeline that transports propane from Alberta's gas fields to Sarnia, location of several crackers. It is to be in service in 2012.

"Why would ethane travel from the Marcellus to the U.S. Gulf Coast when other shales are closer? The ethane is needed in Sarnia where those crackers can use it year-round," said Karen Kabin, director of business development for Kinder Morgan Products Pipelines.

Contact the author, Leslie Haines, at lhaines@hartenergy.com.