Blue Racer expanding at Marshall County site - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Blue Racer expanding at Marshall County site

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Photo courtesy of Blue Racer Midstream Photo courtesy of Blue Racer Midstream

Blue Racer Midstream Services CEO Jack Lafield said he's pleased with the direction business is going in the Marcellus and Utica shale plays.

The company provides mid-stream services to rich-gas producers in the Utica and Marcellus shale regions. The company recently inked long-term deals in the liquids-rich Utica region with Consol Energy, Hess, Eclipse and PDC Energy Inc., adding them to a business portfolio that already included the likes of Chesapeake, Rex Energy Corp., EnerVest and TOTAL Gas & Power North America Inc.

Lafield said it's a "very exciting time in the evolution of the Utica Shale."

"The Utica is a complex play with tremendous potential," he said. "Utica producers face a number of challenges, and we continue to build out a very large super-system in the Utica to assist them. 

"Blue Racer's integrated super-system of midstream assets is the largest system in the Utica. We have created a footprint that provides our producer customers with maximum flexibility."

He said Blue Racer's system and ongoing expansion programs "are specifically designed to provide gathering, processing and fractionation services across the basin, along with interconnectivity to major residue markets and optionality for our producer's natural gas liquids." 

Lafield also said Blue Racer's assets "are positioned exactly where our producers need them so that ultimately they achieve the best possible price realizations."

"We think a lot of our success in the Utica really comes from the success we've had in the Marcellus play with Caiman," he added. "We think the producers and the state of West Virginia saw that we are able to execute on our commitments that we can bring capital and our expertise to build-out the infrastructure necessary to allow producers to drill in the Panhandle counties."

Blue Racer is owned by Caiman Energy II and Dominion. As part of their agreement, Dominion transferred the Natrium I natural gas processing plant to the joint venture in August. It's currently back in operation after a fire forced a temporary shutdown.

Lafield said Natrium II, a 200 million cubic feet per day expansion, should be in service early in March. He said when Blue Racer was formed, they already had a 200 MMcfd plant on standby. 

"Basically it was in storage; waiting, really, for the right spot to put it in," he said. "When we entered into Blue Racer, we decided together the best place to expand would be at the Natrium site. 

"So we immediately began (work) last summer, to place that plant at the Natrium facility. It will be in service by March 1 and give us 400 MMcfd total capacity.

A fractionation plant at the Natrium property in Marshall County will allow the company to process nearly 50,000 barrels per day by spring 2015, he said. 

"Not only will it handle the gas flowing through Natrium, but also the gas being processed in Ohio at our Berne location," he said.

The Berne plant, located in Monroe County, Ohio, is designed to accommodate three 200 MMcfd cryogenic processing units. Blue Racer expects to commission the first 200 MMcfd processing unit at Berne by the end of the third quarter of 2014. Together, the Natrium and Berne facilities are large enough to enable Blue Racer to process 1 billion cubic feet of natural gas per day, the company says.

"The joint venture with Dominion combined our entrepreneurial structure and strategies with a long-standing business that already had assets and people and had been involved in projects in both Ohio and West Virginia," he said. "It combined our fast-moving strategy and knowledge about how to do what I like to call upstream-midstream activities, the gathering and processing part. Dominion really didn't have that expertise."

Lafield said other oil- and gas-producing parts of the country had at least some infrastructure already in place when the shale boom hit. Ohio, Pennsylvania and West Virginia didn't have that luxury.

"The Marcellus and Utica really had nothing," he said. "There were no (big) gas plants operating in the state of Ohio, so all of a sudden everybody had to start from scratch. 

"The challenge for Blue Racer and other midstream companies is to try and keep pace with the producers. We have to build brand new facilities, and it takes time and a lot of capital."

He figures the potential returns are enormous, however.

"The facilities aren't available today," he said. "But the key is going to be in the next six years. (The industry) will probably need to spend $30 billion in western Pennsylvania, West Virginia and Ohio. 

"It's going to be an enormous investment, but, obviously, that relates to a better economy and more jobs. It will have a trickle-down effect."