EQT mulling increased takeaway amid output boost
Houston, 15 February (Argus) — Executives for independent producer and midstream company EQT said they are "pretty comfortable" with the company's takeaway capacity position through 2020, but will have to soon consider greenfield pipeline projects to keep up with rising production.
Months of vacancies at the US Federal Energy Regulatory Commission last year as well as increased regulatory scrutiny and an increase in state denials of key permits has put a damper on greenfield pipeline projects, with few remaining in the US northeast that are not significantly delayed or mired in litigation.
EQT is starting construction of its 1.9 Bcf/d (54mn m³/d) Mountain Valley pipeline project, which is expected to begin shipping gas produced in West Virginia to Transcontinental Gas pipeline's compressor station 165 in Pittsylvania County, Virginia, by the end of this year. Federal regulators have approved eight out of 10 requests to begin construction on portions of that line.
And EQT is also considering pursuing a 1.2 Bcf/d, 40-mile gathering pipeline project from southwestern Pennsylvania to Mobley, West Virginia, called the Hammerhead pipeline. The project would cost an estimated $400mn and come on line in the third quarter of 2020. EQT would use the line primarily to feed gas into the Mountain Valley pipeline.
But past 2022, "serious consideration" needs to be given to greenfield takeaway projects, chief executive Steven Schlotterbeck said during an earnings call today.
The company's acquisition of Rice Energy late last year made EQT the largest natural gas producer in the US, boosting its production sales volumes to 3.2 Bcf/d of natural gas equivalent (Bcfe/d) in the fourth quarter of 2017, up by 48pc from the year earlier. The combined companies' proven reserves topped 21.4 Tcfe, up by 59pc from EQT's proven reserves at the end of 2016.
"We have a lot of rigs running," Schlotterbeck said. "We have a lot of [fracturing] crews. We produce a lot of gas."
For the time being, EQT's focus is on integrating the two companies. But it will soon begin mulling how to transport all that gas after 2023, and what obstacles the company might face in accessing more takeaway capacity.
"The next wave of greenfield presents a unique set of challenges from both the regulatory environment as well as the cost environment," chief commercial officer Donald Jenkins said.
To meet that challenge, EQT has put a portfolio together of long-term markets to ensure that its gas continues to move and the company is able to pick up available capacity along the way "from current capacity holders who do not have as much clarity," Jenkins said.
And Hammerhead pipeline isn't the only project EQT's midstream business is eyeing for the future.
"You will see other projects," president of midstream Jeremiah Ashcroft said, noting that EQT has an "organic backlog," and is always looking at how to take volumes to "the best markets."