The Granite Wash is a heterogeneous series of sands, shales and siltstones that has yielded production since the late 1950s. The play is found in the southwestern Oklahoma counties of Beckham, Roger Mills, Custer, Washita and Greer and the Texas Panhandle counties of Gray, Wheeler, Roberts and Hemphill. The former is often referred to as the Colony Granite Wash, while the latter is referred to as the Texas Panhandle Granite Wash.
Natural gas can be found in multiple zones between 9,500 and 13,000 feet, and in some sections, as deep as 17,000 feet. The play deposition is quite thick (1,550 to 3,500 feet) and consists of as many as 70 different sandstones or conglomerate sections. This extreme variation in mineral content historically has made finding the core areas, or sweet spots, a challenge.
Yet, despite its low permeability and porosity as a tight sands play, gas and condensate production have bucked the historical trend and have proven economical even in the current low gas price environment—thanks to horizontal drilling techniques and multi-stage fractionation.
Also, the play has liquids potential, although zones may vary significantly in oil and rich gas pay quality. However, the saturation of liquids is what makes it one of the more attractive and economic unconventional plays today.
Although a few area producers have shifted their efforts to oilier plays within their portfolio, others have stayed home in the Granite Wash. As a result, existing midstream infrastructure in the area is waking up, undergoing expansions or otherwise being enhanced to accommodate growth.
Gas gathering
Several of the area's gas-gathering systems have evolved over the years and are now sited on top of or near the developing Granite Wash trends in both Texas and Oklahoma. Some of these older systems were high-pressure systems, while others are operating at lower pressures. In many cases, compression has been added due to the declines rates of some of the resources.
Also, small gas-processing plants and some treating plants can be found spaced around the region, each unique to earlier purposes. With today's developments, gathering and processing system operators are finding that their existing infrastructure can support developments, but they must re-tool and add to their existing infrastructure to accommodate the expected level of Granite Wash resources.
Table 1 provides an overall list of area gathering systems, processing plants, proposed expansions and natural gas liquids (NGL) off-take companies.Three of the larger area gatherers are Eagle Rock Energy Partners LP, Enbridge Pipelines LP, and OEG Energy Corp.'s affiliates, Enogex Gas Gathering LLC and Enogex Products LLC.
Eagle Rock's gathering systems are primarily in Texas, and its East Panhandle gathering system's footprint is centered above a major portion of the Texas Panhandle Granite Wash development in Roberts and Hemphill counties, Texas. Eagle Rock has four existing or re-tooled processing plants and is adding a fifth. The company is considering plans to relocate its plants from its West Panhandle gathering system to a future site in the east if future commercial needs dictate.
Eagle Rock's total cryogenic processing capacity is about 135 million cubic feet (MMcf) per day, but it will expand to about 195 MMcf per day with the startup of its Woodall plant in early 2012. For now, NGLs from the plants are delivered via a marketing arrangement with Oneok Hydrocarbon LP for downstream transportation and fractionation.
Enbridge has recently consolidated two major area gathering systems to provide greater connectivity and commercial capability. Its Elk City gathering system, which it acquired from Atlas Pipeline Partners in 2010, has three processing plants with capacities of 370 MMcf per day. The system complements its larger Anadarko gathering system which has six gas-processing plants. With a major portion of the combined system footprint in Oklahoma, each of the two systems reaches back into the Texas Panhandle Granite Wash area and can accommodate developments there as well as those centered beneath its Colony Granite Wash developments in Oklahoma.
Also, Enbridge's new Ajax plant in Wheeler County, Texas, is expected to be completed in early 2013. Enbridge has indicated its total regional gas-processing capability on the combined systems will then be 1,200 MMcf per day.
Elsewhere, Enogex Gathering's assets in southwestern Oklahoma provide direct access to developing Granite Wash production. Enogex Products operates gas processing and treating plants to provide additional services to upstream operators on the Enogex system and others.
Enogex' gathering system also extends just over the state line into Wheeler County, Texas. With recent pipe and compression expansion in Wheeler County, Texas, and pipe expansions in Washita and Custer counties, Oklahoma, Enogex Gathering increased each systems' local gathering capability.
Concurrently, Enogex Products purchased a processing plant with capability of 200 MMcf per day for its upcoming Texas operations and is currently constructing a 200 MMcf per day plant in Canadian County, Oklahoma, to support its growing Oklahoma operations expected to begin by the end of 2011. Also in Oklahoma, Enogex Gathering is increasing its capabilities by building more than 120 miles of gathering pipeline and compression in coordination with area producers.
Separately, Enogex has just announced a proposed acquisition of gathering assets in Roger Mills County, Oklahoma, and a dedication of production to those assets. That transaction should be finalized prior to yearend 2011. Previously in 2009, in support of Chesapeake Energy Corp.'s development efforts in the Colony Granite Wash play, the Enogex affiliates had installed 120 MMcf per day of area gathering and processing capability at a Clinton, Oklahoma, plant.
Other regional gas gathering and processing operators of note include Crestwood Midstream Partners LP, Mark West Energy Partners LP, Penn Virginia Resource Partners LPs, and Superior Pipeline Co. Each has also found its niche in providing infrastructure to support ongoing play development.
Linn Energy LLC, one of the area producers, has elected to install its own gathering capability for its production, driven by some recently unfavorable operating experiences. It is constructing a 63-mile pipeline to deliver to multiple processing plants. Linn's strategy is to assure it has flexible access to processing capacity and avoid any future bottlenecks due to local power failures, compressor failure or other plant-access issues.
Gas processing
With liquids-rich gas production and, in many cases, condensate quantities, the Granite Wash play is economical even in the low gas-price environment. Many of the gas-processing facilities are at or near capacity. With numerous plant expansions or new plants under construction, produced NGLs must find access to markets.
Table 2 is a list of existing or proposed NGL pipelines that can route NGLs to fractionators and other markets. Some NGLs have been routed to local fractionators in the Midcontinent and end up in refinery markets in the Midcontinent or Midwest. Others are routed to other market areas.
However, the majority of NGLs are destined for delivery to either the NGL Hub in Conway, Kansas, or to the Mont Belvieu, Texas, facilities. Mont Belvieu is the primary NGL market hub where, post-fractionation, products can be routed to refinery and petrochemical markets along the Gulf Coast. Some NGL purity products from Oklahoma fractionators have also been routed to Mont Belvieu for storage, optimization or to balance the markets.
In 2009, Oneok Partners led the area's NGL export effort with the implementation of its 150,000 barrel (bbl.) per day Arbuckle Pipeline. Due to production growth, Oneok has indicated it will expand the Arbuckle Pipeline by up to 80,000 bbl. per day to a total of 240,000 bbl. per day.
Working within its portfolio of existing area pipeline assets, Oneok is increasing its ability to transport purity projects on its Sterling I pipeline, and will add purity products capacity to its Sterling II pipeline. Also, the company proposes to build a Sterling III NGL pipeline with capacity of 193,000 bbl. per day, assuming necessary commercial commitments are received.
To date, the largest proposed project is the Texas Express NGL Pipeline, which will collect NGLs from the Granite Wash and Barnett shale to route to Mont Belvieu. According to project developers, the project is of sufficient scale to accept added volumes from the Rocky Mountains, Permian Basin, and the Conway Hub via the existing Mapco NGL pipeline system or the Overland Pass NGL pipeline system expansion. This flexibility would help minimize what was a growing potential physical bottleneck for added and proposed NGLs being produced not only in the MidContinent but also in the Rockies and Permian Basin.
For the Texas Express, Enterprise Products Partners LP will construct and operate the NGL pipeline portion, while Enbridge will build and operate the various gathering systems to regional plants along the route. The 580-mile mega-pipeline will have an initial capacity of 240,000 bbl. per day with expansion capability to 400,000 bbl. per day. Facilities are proposed to be in service by mid-2013.
Meanwhile, Enterprise Products Partners LP recently announced the start of a binding open season being conducted by Skelly-Belvieu Pipeline Co. LLC, a joint venture partially owned and operated by an Enterprise affiliate. The open season seeks shipper support for a proposed expansion of the 570-mile Skelly-Belvieu NGL pipeline. The system originates in Carson County, Texas, and transports purity products from the Midcontinent to Mont Belvieu, Texas, where Enterprise owns and operates nearly 100 million bbl. of liquids storage capacity.
Depending on shipper response, the expansion project can be designed to accommodate some 17,000 bbl. per day of incremental annual average capacity to the system, 90% of which is being made available in the open season for priority service. However, achieving the additional capacity would involve installing pumps and related equipment.
Provided there is sufficient shipper commitment, the additional capacity could be available as soon as fourth-quarter 2012. The open season ran from October 19 to November 16, 2011.
Last but certainly not least, DCP Midstream LLC proposes to acquire and convert the existing Seaway Products Pipeline owned by ConocoPhillips from oil-products service to NGL service. NGLs received in the Oklahoma area could then be routed southward to facilities in Mont Belvieu. DCP Midstream proposes to provide any upstream facilities need to connect to NGL supply and will finalize the facilities to reach Mont Belvieu. Capacity of the proposed system will be 150,000 bbl. per day, and the system will operate as a common carrier with a regulated rate
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