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PITTSBURGH—Two major midstream players, MPLX and MarkWest Energy Partners, completed one of the biggest energy-industry mergers of 2015 in December. That created one new and much larger firm that can grow by employing the assets of both, according to presentations by two executives at Hart Energy’s Marcellus-Utica Midstream Conference & Exhibition Jan. 27 at the David L. Lawrence Convention Center.
MPLX is the midstream MLP of Marathon Petroleum Corp.
Craig Pierson, president of Marathon Pipe Line LLC, pointed to “the significant opportunities in front of us” as he began his review of the merger. “We have opportunities to serve the market across the entire hydrocarbon value chain” by joining adjacent assets.
Pierson said he sees an “efficient overlap” of the two firms—including a major presence in the Marcellus and Utica midstream—“that will enable us to serve the market in the most efficient way.” MPLX, he reminded the audience, began in 2012 “with a very strong sponsor in Marathon Petroleum,” which has substantial midstream assets that support its refining and market operations, creating important dropdown opportunities.
Added to those Marathon assets now, “MarkWest is a premier gatherer, processor and fractionator, with assets that are very close to some of ours,” he said. “We have a great organic growth backlog and not just in local markets, that will hopefully improve producers’ netbacks.”
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He cited the advantages of integrating MarkWest’s Utica gathering and processing assets centered on Canton, Ohio, which fit together well with Marathon’s nearby refinery at Catlettsburg, Ky. Adding to the combined operation, the new 50-mile, 16-inch Cornerstone Pipeline will move condensate and natural gasoline for Utica producers. Cornerstone will enter service late this year.
Work is on schedule “and by this time next year we will have a couple months of operations under our belt,” he said.
Looking to 2017 and beyond, Pierson said MPLX plans pipeline projects that will move Utica production west to its refineries at Lima and Toledo, Ohio, and other Midwestern downstream markets.
“When the industry does rebound, we will be there with a lot of growth potential,” Pierson said of the westward expansion.
Building on Pierson’s presentation, Scott Garner, vice president of corporate development and joint-venture management at MarkWest, discussed the business strategy set following the MPLX/MarkWest combination. He noted the merger of the firms built on a business relationship that dates back 25 years.
Garner opened his portion of the presentation by building on Pierson’s remarks that there are “a number of combination synergies that we will draw on. There are opportunities now that we did not draw on in the past.” He also emphasized MPLX/MarkWest will focus on connecting production from high-performance resource plays, such as the Marcellus and Utica, to both global and U.S. downstream markets.
“MarkWest will distinguish itself through service to its customers,” he added, noting MarkWest ranks as the second-largest gas processor in the nation, the No. 4 NGL fractionator and that it handles 10% of total U.S. NGL production. Currently, MarkWest has 11 growth projects underway, which is actually down and “a bit of a breather” from a rapid growth pace in recent years as production levels off.
MarkWest is the major gathering and processing player already in the Marcellus and Utica, Garner said, noting the firm has 41 processing and fractionation facilities serving the two plays with 10 additional facilities under construction. Garner added the firm handles three-quarters of the rich-gas production from the Marcellus and Utica with some 8 million producer acres dedicated to its midstream system.
It has 1 billion cubic feet per day (Bcf/d) of gathering capacity serving Marcellus producers, 4Bcf/d of processing capacity and 357,000 barrels per day (bbl/d) of NGL capacity. To the west in the Utica, its assets include 1Bcf/d of gathering capacity, 1.3Bcf/d of processing capacity and 160Mbbl/d of fractionation capacity.
Leveraging on the combined processing and refining assets of the firm, Garner said MarkWest is working to upgrade butane produced in Appalachia into alkylate, a high-octane gasoline blendstock.
“Alkylate is an ideal gasoline blending component that will become increasingly valuable with pending fuel regulations,” he said, adding the goal is to “develop Mont Belvieu-like capabilities in the Northeast,” referring to the sprawling NGL fractionation, transportation and storage hub outside Houston.
He noted the U.S. still imports some 500Mbbl/d of gasoline blendstock components to feed eastern refineries—imports that can be gradually backed out as domestic blendstocks from the Marcellus and Utica become available.
Paul Hart can be reached at pdhart@hartenergy.com.
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