Consol CEO: Company plan will increase production - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Consol CEO: Company plan will increase production

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Selling ethane from its Marcellus Shale properties to a European petrochemical company will actual help natural gas production and markets in the United States, Consol Energy Chairman and CEO J. Brett Harvey says.

Consol recently inked an agreement with Ineos Europe AG, part of the Ineos Group, to supply ethane for its European cracker plants. Ethane is used in manufacturing plastics and other everyday consumer products.

The company will pump its propane and ethane through Sunoco Logistics' Mariner East pipeline to the Marcus Hook port on the Delaware River in Philadelphia, where it will be processed and then shipped by sea to domestic and export markets.

Consol previously had announced plans to supply Royal Dutch Shell's proposed Beaver County, Pa., cracker, and Harvey said it's possible the company also could supply the proposed Odebrecht cracker being explored in Wood County.

"By signing this agreement, Consol has secured long-term access to a pipeline that can transport this product to market," Harvey wrote in a statement provided by the company. "This also provides us with the certainty and ability to reinvest right here at home in additional development.

"Importantly, without take-away options for ethane, we, along with our leaseholders, are not realizing the full benefit of the natural gas we develop."

Harvey said Consol plans to invest $14 billion in the next 10 years to develop its Marcellus Shale holdings in West Virginia.

He said in the Northern Panhandle, ethane is produced in what the industry refers to as the "wet" or "rich" gas window of the Marcellus Shale formation. It is produced alongside propane, butane, isobutane, natural gasoline and other heavier hydrocarbons that are removed from the gas stream and then sold separately as individual products. Each one of these hydrocarbons has its own unique market.

"The good news for West Virginia, and the region, is that we have an abundant supply of ethane in Appalachia which most certainly can support new local opportunities," he said. "Clearly, local feedstock for these opportunities will not be a limiting factor."

He said the proposed Odebrecht cracker facility in Wood County also is an option, "and Consol is hopeful that we will have the opportunity to supply them ethane as they take steps to advance the project."

Harvey cited a recent study by Simmons & Co. International that suggests the ethane market in the United States is currently oversupplied and will remain that way for the next few years. The study found as many as 200,000 barrels of ethane were rejected each day in 2013, with that figure expected to grow to 449,000 barrels a day this year.

When ethane is "rejected," it is left in the natural gas stream and sold for its heat content rather than extracting it to sell as a separate product. With this projected increase in supply, "producers may hit a threshold for ethane rejection due to pipeline specification limits. 

"This would result in natural gas curtailments and shut-ins, unless ethane is extracted and sold separately," Harvey said.

With historic levels of ethane production and limited demand and take-away opportunities currently available in the United States, Harvey said it makes sense to develop the market overseas as well as here in the U.S., "all while directly investing in the region and tapping the local workforce, vendors and suppliers to responsibly develop this important resource."

Consol President Nick DeIuliis, meanwhile, called the agreement "a vote of confidence that the Marcellus Shale resource base represents a long-term, reliable energy supply for industrial users both at home and abroad" and said it allows them to diversify end-user markets for the region's natural gas products.