East Coast Awakening

Range Resources Corp.'s newest contract to ship ethane to end markets has been years in the making. It now brings secure demand for some 300 million barrels of the company's estimated 1 billion of recoverable ethane on its 335,000 liquids-rich Marcellus acres.

According to Range chairman John Pinkerton, while speaking at the IPAA's OGIS New York investment symposium last year, work on monetizing the company's Marcellus natural gas liquids (NGLs) began just as soon as the company proved it had a play, back in 2007.

In the latest arrangement, Ineos Europe AG has contracted 10,000 barrels a day of Range's ethane, increasing to 20,000, out of Sunoco Inc.'s former Marcus Hook, Pennsylvania, refinery site and dock, where it will be loaded onto ships. Known as the Mariner East project, this is the third of three Range plans for marketing its NGLs, adding overall some 35 to 45 cents of value per thousand cubic feet of produced Marcellus gas. Also, stripping more of the liquids from the gas stream will allow Range to put as much as 1.8 billion cubic feet per day of dry gas into pipelines in the future.

Another arrangement—the Mariner West project—is already under way and will send ethane to Nova Chemical Corp.'s plant in Sarnia, Ontario, beginning in mid-2013. Another, the Appalachia-to-Texas (Atex) pipeline project with Enterprise Products Partners LP, will take Range ethane to Enterprise's Gulf Coast storage caverns at Mont Belvieu, Texas, in early 2014.

In all, Range has contracts for 25,000 barrels of ethane a day, increasing to 55,000 in the coming few years, in 15-year contracts.

The deals are among many surprising turnarounds along the East Coast as a result of new oil, dry-gas and NGL supply from Appalachia and elsewhere that has producers, shippers and end-users sitting up in what had become a sleepy market.

For example, Plains All American Pipeline LP is modifying its Yorktown, Virginia, oil-rail terminal at Western Refining Inc.'s former facility there—some of the 50% of East Coast refining capacity that has been closed or targeted for closing. Plains will unload up to 130,000 barrels per day from unit and manifest trains at the port. The dock had once received seaborne shipments of crude whose Brent-based pricing had been its undoing. Now, Bakken oil is being loaded onto ships there, instead, and sent to surviving East Coast refineries.

Refiner Sunoco, whose Brent-priced problem put it up for sale, has been acquired by Dallas-based Energy Transfer Partners LP. Along with it comes Sunoco's general-partner interest in midstream operator Sunoco Logistics Partners LP, which is a partner with Range in the Mariner East and Mariner West projects.

In another deal, private-equity investor The Carlyle Group LP plans to continue operations at what was Sunoco's Philadelphia refinery by railing Bakken oil to it. Also, a plant upgrade will use new, nearby Marcellus gas and NGLs in operations.

In Ohio, newly independent refiner Marathon Petroleum Corp. is anxious to bring in upcoming Utica-shale-play crude oil and condensate supply in its operations, particularly at Canton, just south of Cleveland.

Meanwhile, Reuters reports that BP Plc has won U.S. approval to send new WTI-based-priced U.S. oil to refineries along Canada's East Coast, and that Royal Dutch Shell also has applied for permission.

Getting back to ethane, besides Shell's plans for a world-class cracker in Pennsylvania, Aither Chemicals LLC is moving forward after holding a non-binding open season for ethylene it would produce from a potential new cracker in West Virginia.

Houston-based Westlake Chemical Corp. plans to convert its Calvert City, Kentucky, plant feedstock from propane to ethane from the Marcellus play. Including an expansion, this would result in some 20% growth in the PVC plant's output.

Industry analysts have pointed to moneymaking opportunity from the North American unconventional-resource-play boom as migrating now from the play-makers to the midstream and downstream operators.

But efforts to debottleneck transportation issues and unlock new markets are also making room for an all-new E&P upside cycle. And, the more Appalachian homes that are found for Marcellus NGLs and Bakken oil, the more room on the U.S. Gulf Coast, West Coast and other markets for new supply from the Niobrara, Permian, Anadarko Basin, Eagle Ford and other growing plays.