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MarkWest Energy Partners, L.P. Message Board

  • moneyonomics moneyonomics Apr 28, 2014 9:30 AM Flag

    Williams Suspends Investment in Bluegrass NGL Pipeline Due to Insufficient Customer Commitments

    Msg 37729 of 37735 at 4/28/2014 8:48:05 AM from iv mlp by


    Williams Suspends Investment in Bluegrass NGL Pipeline Due to Insufficient Customer Commitments

    Company Focusing Capital on Other Projects in Its Large, Diverse Portfolio of Growth Opportunities

    Williams has suspended capital investments in the Bluegrass Pipeline, a proposed natural-gas-liquids project, primarily in response to an insufficient level of firm customer commitments. The company continues to engage in discussions with potential customers regarding the scale and timing of demand for services and the required firm contractual commitments that would support any future capital investments.

    The project, in which Williams is a joint-venture partner, is designed to connect natural gas liquids produced in the Marcellus-Utica areas in the U.S. Northeast with domestic and export markets in the U.S. Gulf Coast. The Bluegrass Pipeline represents a strong long-term solution in the marketplace.

    Williams has a large, diverse portfolio of attractive risk-return growth opportunities. It continues to exercise capital discipline as it pursues projects that garner solid market support, strengthen its cash-flow growth and deliver advantaged connections between large supply areas and growing demand centers.

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    • I have been thinking over the ramifications of this suspension. From my perspective the immediate problem for producers in the Utica/Marcellus is that it eliminates a potential product outlet. So now the pressure is not on Williams or KMP/MWE to sign up customers but for the Utica/Marcellus customers to firm up a market for their product.

      In this regard I see a few interesting issues at play. The market covets the propane from this area. Some of this propane comes from wet gas approaching a world record 1450 btu's. So to access the propane the market is going to have to accommodate the need to lower the btu level of the gas. Absent a market to get rid of the ethane this is going to require a lot of dry gas for blending purposes which exasperates the excess supply of gas in the regions.

      Potential winners and losers! I use the term potential because there are so many dynamic forces in play I think it will take a while for things to stabilize. Winners: Mid stream processors in the area such as MWE, Mariner East should have time to stabilize, railroads, and potential local customers for product such as NE planned crackers and users. Losers: Gulf crackers, Gulf exporters of propane, Gulf plans to export gas and customers in that area. As far as the local E&P companies I think it is too early to call this one way or the other. This will be sorted out for each company.

    • This is big news. The market place for NGL's and ethane is just too volatile and unsettled to invest billions at this time. You have growing NGL's from Texas, mainly the Eagle Ford, Mariner East, potential crackers in Appalachia, and potential huge NGL markets from Canadian shales such as Duvernay. I don't think this thing gets built for five or six years until the market forces and supply are more clear. I would say that there is a greater chance it will be built than not built.