Capacity Crunch

This month’s construction report features several capacity-increase projects for existing infrastructure. These projects represent the operators’ efforts to maximize efficient take-away. Throughout the U.S. infrastructure continues to experience tight capacity due to the operators’ increasing production

To that end, new fractionation and processing facilities are scheduled to be built by Oneok Partners LP, Lone Star NGL LLC, Targa Resources Partners LP and DCP Midstream LLC to help address capacity constraints at Mont Belvieu, Texas, as higher natural gas liquids production spurs future projects to alleviate the bottleneck of liquids take-away.

Also, Atlas Pipeline Partners LP has released an impressive spate of construction announcements. These expansions come in response to the significant growth that has occurred and is continuing to occur on all of Atlas’ systems, which are reportedly operating at or near 100% of capacity.

Atlas plans to increase its growth capital expenditures by about $400 million for the 2011 to 2012 period to accommodate the new projects. These projects include $175 million for the expansion of the Western Oklahoma system, $15 million for the re-start of the cryogenic skid at Midkiff in West Texas and $75 million for expansion of the Velma system.

In the northeast, major plans are brewing to address ethane take-away. Royal Dutch Shell Plc is developing plans to build a world-scale ethylene cracker with integrated derivative units in the Appalachian region. The proposed cracker would process ethane from Marcellus shale gas to produce ethylene, one of the primary building blocks for petrochemicals.

"Building an ethane-fed cracker in Appalachia would unlock significant gas production in the Marcellus region by providing a local outlet for the ethane," says Ben van Beurden, Shell's executive vice president, chemicals. Shell is evaluating derivative choices and favoring polyethylene (PE). Demand for PE in North America is expected to grow, so the economic benefits of a regional cracker make this configuration extremely attractive.

Elsewhere, Plains All American Pipeline LP has big projects in the works for the booming West Texas shale. It recently unveiled plans to construct a new 130-mile crude oil and condensate pipeline, a marine terminal facility and 1.5 million barrels (bbl.) of storage capacity to serve growing Eagle Ford production. The project is expected to cost up to $330 million.

To underpin the project, Plains has secured a long-term throughput agreement with Chesapeake Energy Marketing Inc., a subsidiary of Chesapeake Energy Corp. The project is designed to provide about 300,000 bbl. per day of take-away capacity from the western region of the Eagle Ford play to Corpus Christi, Texas and other Gulf Coast markets.