MarkWest, Marathon Expand Roles in Ohio's Marcellus, Utica Shales as Merger Nears

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Researched by Industrial Info Resources (Sugar Land, Texas)--The eastern half of Ohio is proving to be fertile ground for companies involved in natural-gas development, since Marcellus and Utica shales cover the entire area. Although not as deep as in much of Pennsylvania, with some areas not economically viable for production, the shales still are attracting the attention of such companies as MarkWest Energy Partners LP (NYSE:MWE) (Denver, Colorado) and Marathon Petroleum Corporation (NYSE:MPC) (Findlay, Ohio). Industrial Info is tracking $1.76 billion in active natural gas-related projects in eastern Ohio's Production, Pipelines and Terminals industries.

In July, Marathon's master limited partnership, MPLX LP, announced it would buy MarkWest for $15.6 billion. The deal is expected to close in the fourth quarter. MarkWest, which currently is the largest natural-gas processor and fractionator in the Marcellus and Utica shales, said last week that it would develop a 2 billion-cubic-foot-per-day natural gas-gathering system in southeast Ohio over the next three years.

MarkWest also is planning a $100 million addition at its Hopedale natural gas liquids (NGL) fractionation facility in Jewett, a city in eastern Ohio. The company expects to build a 60,000-barrel-per-day (BBL/d) train. KP Engineering Limited Partnership (Tyler, Texas) is performing engineering, procurement and construction (EPC) services.

"By the second quarter of next year, we will increase capacity of our Hopedale complex in Ohio [to] 180,000 barrels per day, with the addition of a third train," said Frank Semple, the president, chairman and chief executive officer of MarkWest, in a quarterly earnings call earlier this month. "We forecast total fractionated volumes in 2015 to grow by 50% over 2014."

Semple also noted that MarkWest brought online a 23,000-BBL/d condensate stabilization facility in Harrison County in March. He said the new facility already is fully utilized.

"Stabilized condensate is currently being transported from our complex to Marathon refineries at Canton and Catlettsburg [in Ohio], as well as international markets," Semple said. "This is the largest condensate stabilization facility in the Marcellus and Utica, and provides a great example of how we're developing critical projects that integrate the downstream markets. Beginning in 2016, the facility will be the origin of MPLX's new cornerstone pipeline, which will transport condensate and other NGLs in the region, directly to Marathon's refinery in Canton, Ohio."

Alkylation to Play Bigger Role
MarkWest and Marathon also are considering the construction of an alkylation facility at MarkWest's Hopedale facility.

Alkylate is a blendstock that enhances the strength of octane in gasoline. Earlier this week, the U.S. Energy Information Administration reported that U.S. gasoline demand has improved from the same time last year, with more motorists buying higher-octane gasoline.

Industrial Info already is tracking Marathon's proposed upgrade of an alkylation unit at its refinery in Canton. The project is in the early planning phases and would not kick off until first-quarter 2017 at the earliest, assuming it is approved. Marathon is still defining the scope, but expects to modify the main fractionation column and perform minor upgrades to improve the quality of alkylates produced. Currently, the project has an estimated investment value of $5 million.

Another high-profile company, BP plc (NYSE:BP) (London, England), is weighing plans to add an alkylation unit at its Toledo Refinery in Oregon, Ohio. BP-Husky Refining LLC, a joint venture with Husky Energy Incorporated (Calgary, Alberta), would construct a unit alongside its existing, 55,000-barrel-per-day (BBL/d) fluid catalytic cracking unit (FCCU) to produce additional alkylates. If approved, the unit addition likely will not kick off until first-quarter 2018.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and ten international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.