Infrastructure continues to improve in the Mississippi Lime formation with numerous expansion projects in progress throughout the play in western Oklahoma, north-central Oklahoma and south-central Kansas, says a senior executive with Unit Corp.’s Superior Pipeline Co. organization.
And while U.S.-Midcontinent plays such as the Mississippi Lime offer a vast amount of existing oil and natural gas infrastructure and assets with an identifiable upside, pipeline and plant-capacity limitations still exist, according to Bill Ward, vice president of supply and business development at Superior.
With production only expected to increase from the Mississippi Lime, Granite Wash, Cana Woodford and other booming plays in the region, it is clear that significant infrastructure investments will be required to drive the upgrading and building of new gathering systems, processing plants and fractionators for gas and NGLs, and takeaway pipelines for crude oil to ensure capacity can meet projected supply, Ward told DUG Midcontinent attendees in Tulsa.
Ensuring crude, residue gas and NGLs reach optimal markets and command the highest price at the lowest marketing cost is absolutely essential. Without that assurance, the potential for increased and faster payout for shale operators is arguably at risk.
That is where full-service midstream companies like Superior Pipeline come in, he added. Founded in 1996 and acquired by Unit Corp. in 2004, the Tulsa-based firm has numerous assets geographically well situated in the Mississippi Lime. Those assets include greenfield plants in Kay County, Oklahoma, and Reno County, Kansas.
“For a lot of us, the key impacts of the Mississippi Lime still amount to a science project,” said Ward. “We have a unique opportunity to react fast and provide midstream services for this emerging play.”
Ward said his company offers producers a “modular concept” or “staged” approach to construction projects by designing systems that can be scaled-up for future growth. Ward was part of a panel discussion that highlighted midstream legacy infrastructure and new projects.
A few of the larger players in the Mississippi Lime include Apache Corp., Chesapeake Energy, SandRidge, EOG Resources, Devon Energy and Range Resources, with SandRidge being the biggest acreage holder.
Although the Mississippi Lime is still in the development stage, critical efficiencies and optimization techniques are taking hold and as evidenced by state oil production data. Other Oklahoma players in addition to Superior are indeed moving the needle.
For Velocity Midstream Partners LLC, the focus is on engineering, acquiring, owning and operating efficient and cost-effective gas-gathering and transportation pipelines, compression-treating and processing assets in Louisiana, Oklahoma and Texas.
“Historically, the wellhead was trucked to pipe or a refinery,” said Rick Wilkerson, Velocity Midstream president and chief executive. “The Midcontinent is fairly wellpiped, so the focus should be on gathering, intermediate pipes and other transport options in order to reduce trucking costs which can be exorbitant,” Wilkerson said. “The economics work beautifully as long as there are the proper IPs [initial production], EURs [estimated ultimate recovery] and such.”
With both an upstream and midstream division, Eagle Rock Energy Partners LP moves and markets its own production. The Houston-based partnership completed the acquisition of BP’s Sunray and Hemphill processing plants and associated 2,500-mile gathering system servicing the liquids-rich Anadarko basin of the Texas Panhandle in October 2012.
The $227.5-million acquisition added significant scale and reach to Eagle Rock’s existing position in the core of the Granite Wash play and strengthened the company’s position in the growing Cleveland, Tonkawa and Hogshooter plays, Fox said.
“We see this as one of the most active areas of the country. It offers everything a midstream company could want; that is why we are there,” said Roger Fox, Eagle Rock’s midstream senior vice president. “In Granite Wash, having adequate NGLs, condensate and crude takeaway is quite critical for us. But it comes at a price.”
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