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PITTSBURGH—The 2018 Marcellus-Utica Midstream Conference got underway Jan. 31 with opening keynote speaker Robert Phillips, chairman, president and CEO of Crestwood Equity Partners LP (NYSE: CEQP), declaring “2017 was a good year, 2018 is going to be a great year” for his company, which operates diversified midstream assets in active basins across the U.S., including a significant gathering operation in the Marcellus.
He also told an audience of about 1,000 that the Marcellus-Utica’s unparalled natural gas resources have long-term growth potential not only for Crestwood, but also the entire industry. “In our view, it has an endless supply of gas for both the Northeast gas markets and the rest of the U.S.”
Already, the Marcellus-Utica accounts for 35% of natural gas production in the U.S. at about 22 billion cubic feet per day (Bcf/d) to 25 Bcf/d. “It is the largest single source and a vital source to all the markets now,” Phillips said.
But he cautioned that such long-term outlooks for the Marcellus-Utica—particularly beyond 2020—are dependent on several factors, not the least of which is the need for additional infrastructure.
“Today there are approximately 17.5 Bcf/d of pipeline projects underway. Most of those were underwritten by producers,” he said. “We believe most of those projects will largely fill up in the next three years. Therefore, we may be right back here needing more projects to drive more supply development.”
Phillips said Northeast Pennsylvania growth forecasts are entirely contingent on takeaway capacity. “We think it’s dependent on how many projects we can get out,” he said. ‘We think Northeast Pennsylvania needs another 3 Bcf/d to 5 Bcf/d to realize its full potential.”
Of course, building more takeaway capacity faces regulatory challenges. Phillips said Crestwood operates in several basins across the U.S. so he couldn’t say that the regulatory environment was any more challenging in the Northeast U.S. than anywhere else, but admitted that regulatory difficulties in the Marcellus-Utica are significant and threaten future natural gas growth in the region.
“This is hand-to-hand combat in this region. Not only do we have to deal with the federal regulatory environment, but also numerous state-level regulatory agencies that have to clear to get projects built to evacuate that gas and get it exported,” he said.
For that reason, Phillips said southwestern Marcellus has an advantage that will continue to lead to a “fairly large basin [price] differential” that will work against the producers in Northeast Pennsylvania from an economics standpoint.
Phillips also cited the need to manage the region’s volatility. Crestwood owns 50% of the Stagecoach storage facility in Northeast Pennsylvania. “We live on volatility. We predict more volatility. We’ve seen it this winter,” he said. He said it’s another reason the region needs even more connectivity to manage demand and growth as well as price swings.
He said this winter’s cold spell produced a spike in prices. “It’s a real demand event that we haven’t had in about four years. We’ll continue to see that spike when we have that kind of demand and limited supply,” he warned.
Phillips also believes the region has a need for more NGL services.
“We view the Marcellus-Utica as a significant NGL supply basin,” he said. “We expect to go from supply of about 225,000 barrels per day [bbl/d] in 2016 to 300,000 in 2020. In the entire Marcellus region we are currently running about 500,000 bbl/d to 600,000 bbl/d. Our forecasts have that going to 800,000 bbl/d to 900,000bbl/d. We need more takeaway and we need more service to the local markets.”
Len Vermillion can be reached at lvermillion@hartenergy.com or @LenVermillion.
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