American Oil and Gas Reporter - June 2014 - 141

SpecialReport: Midstream Strategies

Ample storage capacity provided by midstream partners assures operating companies
of steady production flow and provides them with the ability to adapt to market gyrations or transportation issues.

work of midstream assets, producers can
connect at the wellhead and ensure flow
through every link of the distribution chain
to East, West or Gulf coast refiners.
For producers, using the midstream effectively requires looking at the entire value chain and accessing multiple connections to move product from the wells to
the buyers.
Northeast Case Study
Producers in plays such as the Marcellus and Utica, which have both dry and
rich gas, confront a different set of needs:
a lack of take-away infrastructure, but with
major consumer markets located nearby.
With the exception of recovered ethane,
which must move by pipeline, accessing
local demand for NGLs such as propane,
butane and natural gasoline requires a
midstream portfolio that includes storage,
trucks, rail cars, export docks, and connections with customers.
Operations in the Marcellus/Utica
must extend across the full range of midstream services, from gathering at the
wells to marketing among end-users,
with an emphasis on trucks, rail loading,
storage facilities and export. For instance, one system in Harrison and Doddridge counties, W.V., provides gas gathering and compression for a 136,000-acre
dedicated area in the Marcellus. It delivers rich gas into another company's large

processing plant and residue gas into three
pipelines for transport.
This infrastructure is being expanded
in step as production grows to provide
connectivity for Marcellus producers to
major regional pipelines through two
pipelines in Northeast Pennsylvania and
western New York. It also has the capability to balance seasonal supply/demand
fluctuations with more than 26 billion cubic feet of gas storage located 150 miles
northwest of New York City.
The system offers take-away for NGLs
by truck, rail, pipeline and export dock,
providing flexibility for producer partners
to choose among various end markets and
pricing options. The operator's longstanding relationships in the propane
business extend both directions: upstream
to Utica and Marcellus producers and
downstream to wholesale and retail resellers.
As a direct buyer of NGLs from producers at market prices, the system operator provides flow assurance through
long-term agreements and sells these
commodities to its customers, or can deliver NGLs all the way to end-users on behalf of its producer partners.
Midstream Bottom Line
Producers face enough economic and
operational challenges of their own. Not
the least of these is a shortage of infra-

structure to develop and take away all the
new production that is ready to come on
line. Everyone in the industry is coping
with staff shortages, fluctuations in prices
and input costs, and regulatory issues.
So when it comes to making midstream decisions, we encourage a focus
on the basics. Flow assurance for the product is number one and access to the best
markets and pricing is number two. Like
a producer plans internal investments,
midstream needs should be mapped over
the life of production assets. Most likely,
this will involve multiple types of midstream operations, along with options to
choose among different paths to market.
Even more than diverse assets and operations, though, midstream success
comes from expertise and relationships.
To maximize the value of production, producers need a partner with the skills for
solving complex logistical problems and
the relationships to connect with other resources and customers.
❒

BILL
GAUTREAUX

Bill Gautreaux is president of the
liquids and crude business unit of
Crestwood, a pair of publicly traded
midstream partnerships that connect
energy supply with demand across
North America, where he is responsible for all operations, marketing, trading and logistics for Crestwood's crude
oil and natural gas liquids business. He
was a founding partner of Inergy LP
and Inergy Holdings LP, and led the development and operations of Inergy's
crude oil and NGL business. He was
named president of Crestwood's liquids
and crude unit when Inergy and Crestwood merged in 2013. Gautreaux has
28 years of energy industry experience,
having previously worked at Dynegy,
LPG Services Group, and Ferrellgas.
He has a bachelor's from William
Jewell College.
JUNE 2014 141

American Oil and Gas Reporter - June 2014

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