Now that their marriage is complete, MarkWest Energy Partners and Marathon Pipeline Partners are getting to the business of combining their interests.
Colorado-based MarkWest has a lot of butane to sell. The company said it markets about 75 percent of natural gas liquids produced in the Marcellus and Utica region and butane is one component of that.
Marathon Petroleum Corp, the parent company of the pipeline firm that acquired MarkWest for $15.6 billion last year, is betting on government regulations requiring gasoline to have higher octane ratings. Butane can be refined into alkylate, an octane booster.
The companies saw this coming when they announced the merger last year. Marathon CEO Gary Heminger told analysts last July that the dynamic makes MarkWest that much more attractive and opens up the possibility of a standalone alkylate plant in Appalachia.
Currently, the product is produced in oil refineries, not in the gas fields, along with a host of other products.
“I think it makes sense to manufacture it within the region” Mr. Heminger said in July.
On Tuesday, MarkWest and Marathon said they’re waiting for a decision on the project within the next 12 months. They’re considering siting the facility somewhere in the tri-state area, if not next to MarkWest’s Hopedale natural gas processing plant in Jewett, Ohio, then near it, said Scott Garner, vice president of corporate development and joint venture management at MarkWest.
“We’re talking to producer customers about it,” he said at Hart’s Marcellus-Utica Midstream conference at the David L. Lawrence Convention Center, Downtown. “The technology has been identified. It appears feasible.”
Butane, like all natural gas liquids whose production has soared along with oil and gas, have seen prices fall as demand struggles to catch up to supply.
On Tuesday, normal butane traded at 49.5 cents per gallon, down from $2.21 five years ago.
Marathon Pipeline’s director of investor relations, Lisa Wilson, said that Marathon Petroleum would likely buy part of the alkylate produced at such a plant, but the idea is to sell to other refiners as well.
“It serves a broader need,” she said.
Anya Litvak: alitvak@post-gazette.com or 412-263-1455.
First Published: January 27, 2016, 10:37 p.m.
