this week announced the third phase expansion of the Marcellus Shale natural gas processing infrastructure has been completed.
The third phase expansion includes an additional 120 Mmcf per day of cryogenic natural gas processing capacity, 20 miles of additional gathering and residue gas pipelines and 21,000 horsepower of additional compression.
The phase three assets are located in southwestern Pennsylvania and are owned and operated by MarkWest Liberty Midstream & Resources, L.L.C., a joint venture between MarkWest Energy Partners, L.P. and Midstream & Resources, a private equity fund. MarkWest Liberty has long-term agreements with Range to provide gathering and processing services and infrastructure assets.
With the expansion, Range’s total Marcellus Shale infrastructure capacity is now approximately 180 Mmcf per day. The processing capacity for high Btu gas is approximately 155 Mmcf per day, while the gathering capacity for dry gas (gas that does not require processing) is approximately 25 Mmcf per day.
With the completion of the additional cryogenic gas processing facilities, all high Btu gas will be processed through cryogenic facilities, and the existing refrigeration facilities will be removed. The new cryogenic plant will recover approximately twice the amount of hydrocarbon liquids versus the refrigeration facilities.
Given the high Btu content of Marcellus Shale gas in southwestern Pennsylvania, coupled with currently strong liquids prices, the high Btu Marcellus gas price receives a significant uplift. Based on the current natural gas liquids and gas prices, the gross net back at the wellhead is approximately $2.25 per Mmbtu greater than dry gas, a 45 perent uplift. As a result, the economics for drilling high Btu Marcellus wells is extremely attractive.
Looking forward, additional high Btu gas expansion projects are being developed to increase Range’s high Btu gas infrastructure capacity to 185 Mmcf per day by the third quarter of 2010 and to more than 300 Mmcf per day by mid-2011. In addition, Range has several dry gas infrastructure projects under consideration.
Commenting on the announcement, John Pinkerton, Range’s Chairman and CEO, said, “MarkWest is doing a terrific job building out gas processing infrastructure for our Marcellus production in southwestern Pennsylvania. Range’s Marcellus team is also making significant progress on all fronts. They have done an excellent job contracting for and marshalling the construction of pipelines, processing and other needed infrastructure, while balancing local community needs. In addition, we are now at zero liquid discharge, and we are recycling and reusing 100 percent of the water in our core operating area. Our Marcellus drilling continues to generate exceptional results, and we have made excellent headway driving down costs. We are also making great strides in familiarizing Pennsylvanians, including landowners, elected officials, regulators and conservation groups on modern, responsible natural gas development. Range is well positioned to continue to ramp up its Marcellus production, which in turn provides job opportunities and economic stimulus for Pennsylvania.”