The Daley Note: August 15, 2023
The emerging Ohio-Utica shale play is creating early green shoots of investment on the western edge of the Appalachian Basin.
In its 2Q23 earnings, DT Midstream (DTM) announced plans for new gathering infrastructure targeting the Ohio-Utica shale. DTM plans to build a system with over 200 MMcf/d of gathering capacity to start service in the first half of 2024.
The project is backed by long-term commitments from a large-cap producer, executives said. DTM did not disclose the counterparty, but EOG Resources (EOG) is the obvious candidate.
EOG in 2022 announced its entry in the “Utica Combo,” where the producer acquired leases for 395,000 net acres in eastern Ohio for ~$500 million, including about 135,000 mineral acres in the southern part of the play. According to DTM’s investor materials, the counterparty for the new gathering system controls 395,000 net acres in the same area of eastern Ohio.
DTM plans to integrate the new system with its existing infrastructure via an interconnection with NEXUS Pipeline, and downstream access to DTM's Vector Pipeline and the Washington 10 storage facility near Dawn, ON.
East Daley covered EOG’s rollout of the new Utica play last year, and the potential midstream needs for gas and liquids. Assuming EOG is the counterparty, the produced gas is likely to be rich. EOG previously said it would target the “volatile oil window” of the Utica shale, estimating 60-70% of output will be oil and NGLs and the balance residue gas.
On its own 2Q23 earnings call, EOG briefly described two ongoing midstream projects in the Utica Combo, one in the south (likely the DTM system) and an unspecified development on the north side of the play.
In Energy Data Studio, users can profile gathering and processing infrastructure in the Northeast. It is unclear where the gathered gas will be processed, but there is ample spare processing capacity in eastern Ohio to accommodate growth. Plants in the area that could take volumes include Kensington, owned by Williams (WMB); Berne (Blue Racer); and MPLX’s Cadiz and Seneca plants. The MPLX system has a combined 1.3 Bcf/d of gas processing capacity but recently has been operating below 40% utilization (see figure).
Gas pipeline egress isn’t as pressing a concern on the western side of the Marcellus and Utica. Our current estimate for egress capacity In the Northeast Supply and Demand Forecast shows ample room for an increase in residue production. – Oren Pilant and Alex Gafford Tickers: DTM, EOG, MPLX, WMB.
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