American Oil and Gas Reporter - March 2018 - 98

ConventionCoverage: Independent Oil and Gas Association of West Virginia
An invitation for the West Virginia
Development Group, a collaborative effort
between West Virginia University and
MATRIC, to submit the second part of
an application for a Department of Energy
$1.9 billion loan guarantee further validates
the facility's promise, Hedrick told IOGAWV.
"We are going to get this thing done,"
he predicted. "The Appalachian Storage
and Trading Hub is necessary for the
success of your businesses, the state and
the region. It is important and we are
going to get after it even more."
Jerry James, vice president of Shale Crescent USA and president of Artex Oil, tells
the Independent Oil and Gas Association
of West Virginia that building a regional
storage and trading hub will provide direct
beneﬁts to natural gas producers.

A 2017 study conducted by the West
Virginia, Pennsylvania and Ohio geologic
surveys identified a range of possible locations for the hub's subsurface NGL
storage. Anderson noted the Appalachian
Basin had at least two geologic formations
that appeared to be perfect targets.
$36 Billion Payoff
The storage and trading hub and its
associated pipeline network will have
tremendous long-term benefits for both
business and society, predicted MATRIC's
Hedrick. "The major impact of this multibillion-dollar investment is, according to
the American Chemistry Council, it serves
as a catalyst for the creation of an estimated
$36 billion in follow-on investments in
the chemical industry that are associated
directly with the hub, and more than
100,000 new, long-term, high paying jobs
here in Appalachia," he detailed.
The hub is important, but only in so
far as it attracts the chemical industry
back to Appalachia, Hedrick said. "What
we are after is a supply chain to enable
your businesses to expand broadly and
rapidly, and allow the chemical industry
to land here. That is where those jobs
come from; not from subsurface storage,"
he described.
The hub's storage facilities initially
should have the ability to handle high
volumes of raw materials, likely starting
with ethane and propane and then moving
to butane and ethylene, Hedrick said.
Eventually, the project also should include
a substantial pipe system to distribute
key chemical raw materials.
98 THE AMERICAN OIL & GAS REPORTER

Shale Crescent
Building the hub will have direct benefits for the region's natural gas producers-including higher commodity prices,
predicted Shale Crescent USA's James.
In addition to boosting gas demand, bringing the customers closer to the wellhead
will help cut transportation and midstream
charges, he argued.
James described Shale Crescent as an
economic development project that seeks
to foster business development in the
Mid-Ohio Valley through low gas prices.
"That is what Shale Crescent is all about:
bringing manufacturers to us, instead of
shipping raw materials to them," he said.
Other places in the world have abundant
energy resources, but manufacturers also
require abundant water sources for production and transportation, a skilled labor
force, and markets for their products, he
described, adding historically the Ohio
Valley was a manufacturing center because
it had all four. In the 1970s, domestic energy supplies diminished, and Appalachia
turned into the Rust Best, James said.
"Since 2010, we have seen a 20-fold
increase in gas production from West
Virginia, Pennsylvania and Ohio," he applauded. "This region has energy in
spades. When you have large natural gas
supplies, you are going to have low prices.
We are only going to solve that problem
if we build demand. Appalachia really
only has one competitor in the world,
and it is the Gulf Coast. We now are supplying the Gulf with energy and ethane.
So for manufacturers, it is better to come
here to the wellhead."
40 Billion Cubic Feet
The Appalachian Basin will become
an even more significant gas source as
output from the mature basins in Texas
and Oklahoma declines, predicted Crews,
with Marathon/MarkWest. "Most of the

James Crews, vice president of Northeast
development for Marathon/MarkWest, predicts the Appalachian Basin's importance
as a gas-producing region will increase
as output from the mature basins in
Texas and Oklahoma declines.

new incremental production, both for
NGLs and for dry gas, will come out of
the Appalachian Basin in the future. They
will drill in these other basins, generally
simply to find oil or to keep pace with
the decline curve," he said.
Gas supplies from West Virginia, Ohio
and Pennsylvania now total 27 billion
cubic feet a day, with a third of that wet
gas, he reported. He noted that is a large
share of the nation's 72 Bcf/d production.
Increasing pipeline capacity should boost
Appalachian output to more than 40 Bcf/d
in the near future, Crews projected, adding
that finding markets for that new production will be critical to maintaining
economic prices for operators.
Crews pointed out the basis differential
for NGL pricing between the Northeast
and Mont Belvieu, or gas pricing at Henry
Hub had stretched as much as $1.50 an
Mcf. He projected differentials closer to
50 cents an Mcf once the Appalachian
Basin got adequate pipeline capacity.
"That is a challenge. If you are a producer with a dollar to put into the ground,
and you are competing against a producer
in West Texas, where do you put your
dollar?" he posed. "I think that this year
and next we will continue to see companies
that have a choice move to the Appalachian
Basin, where they can get to markets
more efficiently and still get high prices
for their products."
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