UGI, Citrus sign agreement on productive wells

By Elizabeth Skrapits (Staff Writer)
Published: September 22, 2010

The Marcellus Shale wells Citrus Energy Corp. is drilling for Procter & Gamble near its Wyoming County plant are so productive there’s enough natural gas left over to send to market.

UGI Energy Services Inc., the midstream and energy marketing subsidiary of UGI Corp., forged an agreement with Citrus to use the pipeline that once brought gas to the Procter & Gamble plant to instead move the extra gas out of the plant and into the Tennessee interstate gas pipeline in Susquehanna County.

“This gas we’re talking about here is that which is over and above the requirements of Procter & Gamble at their Mehoopany plant,” said Peter Terranova, UGI vice president of midstream assets and services.

UGI Energy Services plans to acquire and construct facilities to handle up to 120,000 dekatherms – 120 billion British thermal units – of gas per day. Service could begin as early as next spring.

“We’re happy about them (UGI) becoming a transporter-gatherer,” said Steve Myers, Director of Land and Legal Affairs for Citrus. “We have acquired quite a bit of capacity on that line. That was the game plan from Day One when we first walked in the door and started talking to Procter & Gamble. That was how we saw this thing developing.”

Procter & Gamble spokesman Alex Fried said UGI had been providing gas to the company for 45 years.

“They connect to the Tennessee Pipeline in Auburn Center in Susquehanna County about eight miles north of us. From there it can flow to a number of other customers, both residential and commercial,” he said. “UGI gets to re-use a good existing pipeline, and Citrus gets to continue developing wells within the Wyoming County region and not have to stop once they hit P&G’s needs. This provides a much bigger market to the area.”

Last October, Citrus started drilling under an agreement that gives Procter & Gamble minority ownership of the wells with an option to buy them. So far Citrus has drilled six wells for the company, not all of which are producing because they are in various stages of preparation, Myers said.

But at least one has been exceeding expectations. Well production data recently released by the Department of Environmental Protection shows that Citrus’ PG2-1H well for Procter & Gamble ranks fifth in the state, with an average daily production of more than 10.04 million cubic feet of gas each day for the 22 days of the fiscal year reported.

Fried noted that it will take until the next report to determine exactly how the well is producing, since gas flows tend to be high at the start and can decline.

Anything above what Procter & Gamble consumes would be considered “stranded gas” because there is no way to get it to market, Myers said. It is expensive to lay pipeline – and why duplicate a line that already exists, and that has become valueless since it is no longer supplying gas to Procter & Gamble.

“Ostensibly it should help the (UGI) ratepayers in that this will be a piece of pipeline that produces income,” Myers said. “Otherwise it’s just a piece of steel in the ground because nobody’s paying to move gas through it.”

Fried noted, “It’s very logical for UGI to make existing infrastructure available to Citrus. It’s a win-win all around.”

 Terranova said the project is the first UGI Energy Services is undertaking to “provide Marcellus producers multiple avenues to serve high value markets efficiently and bring plentiful, competitively priced, locally produced natural gas to consumers.”

He said he is glad to see how well everything is working out.

“We’ve worked very closely with Procter & Gamble and Citrus to make this happen,” Terranova said., 570-821-2072

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Copyright:  The Citizens Voice