EIA Projections for Natural Gas Processing Capacity in Appalachia


Dec. 18 2017, Updated 10:04 a.m. ET

Natural gas processing capacity

Natural gas processing is the process of separating dry natural gas from natural gas plant liquids (or NGPL). The process involves the removal of water, carbon dioxide, sulfur, and the like because they could potentially cause mechanical issues during pipeline transit.

The increase in natural gas production in the Appalachian region has therefore spurred the development of natural gas processing plants. According to EIA (U.S. Energy Information Administration) estimates, natural gas processing capacity in states such as Kentucky, Ohio, Pennsylvania, and West Virginia rose from 1.1 billion cubic feet per day (or Bcf/d) to 10.0 Bcf/d between 2010 and 2016.

As a result, natural gas production in the above states increased to 22.9 Bcf/d in May 2017 compared to 2.0 Bcf/d in January 2010, while NGPL production rose from 106,000 barrels per day to 621,000 barrels per day during the same period.

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Midstream companies will benefit

An increase in natural gas production benefits midstream companies that provide natural gas processing services. Therefore, Appalachia-based midstream MLPs such as Antero Midstream Partners (AM), EQT Midstream (EQM), and Western Gas Partners (WES) will benefit from increasing natural gas production in the region

The EIA expects natural gas processing capacity to increase by 2.5 Bcf/d over the next two years.

More propane and flexibility to adjust ethane extraction

According to the EIA, the new plants can recover more propane than the older plants, which used older processing technologies. The new plants are also equipped to extract more or less ethane from the natural gas stream. This flexibility to adjust ethane extraction rates has allowed operators to leave more ethane in the natural gas stream (up to the allowable limits) and to sell it as natural gas when the price of ethane is lower than natural gas prices.

Additionally, the natural gas processing capacity buildout in the Appalachian region has been accompanied by additions to regional fractionation capacity. NGPLs are further processed through fractionation, a process through which NGPLs become separate, marketable products.

According to the EIA, fractionation capacity in the Appalachian region increased from 41,000 barrels per day in 2010 to almost 850,000 barrels per day in 2016, and it has the potential to reach 1.1 million barrels per day in 2019.


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