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Midstream shale work moves into mainstream
Photo
Arata
Youngstown
Another company has announced plans to move into the Utica Shale play after securing $800 million in equity-commitment investments. Dallas-based Caiman Energy plans to focus its work in the portion of the Utica Shale that contains oil and heavier liquids, including propane and butane as opposed to dry gas. It does not yet know exactly where that will be, said Stephen Arata, chief financial officer for the company. Current expectations from the oil and gas industry are that the oil and heavier liquids will be found in an area from Trumbull County through western Mahoning and Columbiana counties and continues south.
“We’ll be wherever our customers need us to be,” Arata said.
Caiman Energy collects gas, oil and other fluids, separates them and prepares them for customers. The company intends to build a significant amount of pipeline in the Utica Shale, Arata said.
Now it is much more profitable to work in an area with oil and heavier liquids as opposed to dry gas, he said. Natural gas, which is dry gas, is still selling for about $2.80 per thousand cubic feet.
“We were one of two midstream companies in the wet areas of the Marcellus Shale, us and MarkWest. They have already announced commitments in this area,” Arata said.
Caiman has not signed agreements yet with any companies working in the Utica Shale. It worked with many companies in the Marcellus Shale, he said.
In West Virginia, Caiman has invested $700 million since 2009, Arata said.
“The Utica has 10 times the size footprint that we have in West Virginia,” he said. “There’s a lot of room to grow.”
It’s significant for the Valley to see investment in midstream development, which is the portion of gas production after drilling but before oil and gas are processed for customers. Thus far this year there have been commitments to add 1 billion cubic feet of processing capability, which is four times what currently exist in Ohio, said Eric Planey, vice president of international business attraction for the Youngstown-Warren Regional Chamber.
“This year is going to be the year of midstream,” he said.
Jefferson, Carroll and Columbiana counties are the areas that have been proven to have wet gas, Planey said.
It’s still early in the shale activity, but more such announcements are expected, he said.
“In the 1990s this area would have killed for a $15 million investment. Now it seems we hardly blink at a $100 million investment,” Planey said. “It’s amazing how things have changed.”
Caiman has operated an office in Canton for the past year. The company tends to hire local workers whenever possible, Arata said.
“We had 57 full time workers in West Virginia. Williams [Partners] has since increased that number to more than 100,” Arata said. “We try to use local or regional contractors and subcontractors as well. In West Virginia we were responsible for 1,000 full-time jobs on top of the positions we had.”
The company also expects to contribute significantly to the area’s tax base, matching at least the $70 million it has paid in state and local taxes while working in West Virginia in the last three years, he said.
This has been an exciting year for oil and gas investment in Ohio, said Rhonda Reda, executive director of the Ohio Oil and Gas Energy Education Program.
“So far, we have seen billions of dollars being poured into our borders in infrastructure investments, which is yet another positive indicator of the incredible potential development the Utica Shale brings to Ohio,” she said. “At this early stage of the play, these investments are a great barometer of things to come, and the benefits Ohio will continue to see as development progresses.”
This is the second midstream announcement this week on the Utica Shale. NiSource Gas Transmission and Storage’s Midstream and Minerals Group, LLC announced Monday it has entered into an agreement with Hilcorp Energy Co., a privately owned oil and gas exploration and development company based in Houston, to develop oil and gas in the Utica/Point Pleasant Shale formation in Northeast Ohio and Western Pennsylvania. The companies also will construct new pipeline infrastructure and natural-gas liquids processing facilities to support natural-gas production in the same region.