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Few groups have benefited more from the US shale oil and gas revolution than the master limited partnerships (MLP) that are building critical midstream infrastructure to process the nation’s surging hydrocarbon production and transport these commodities to end markets.
Frenzied drilling in major unconventional plays has enabled the US to grow oil production for the first time in decades and overtake Russia as the world’s leading producer of natural gas.
Even more impressive, the US has accomplished these feats despite declining offshore produce in the Gulf of Mexico in the wake of the Macondo oil spill and subsequent moratorium on deepwater drilling.
Although dry-gas plays such as the Barnett Shale near Dallas and Fort Worth, the Fayetteville Shale in Arkansas and the Haynesville Shale in Louisiana in 2011 accounted for the bulk of unconventional gas production, liquids-rich shale plays–which offer superior wellhead economics–posted the strongest output growth.
For example, output from Appalachia’s Marcellus Shale last year doubled to almost 6 billion cubic feet of natural gas per day, while production from the Eagle Ford Shale in southeast Texas jumped by 64 percent, to about 3 billion cubic feet per day.
With natural gas prices likely to remain depressed for some time, we expect producers to continue to shift capital expenditures and drilling activity to liquids-rich plays.
Many of these regions lack sufficient midstream capacity to handle surging volumes of natural gas liquids (NGL), a group of heavier hydrocarbons such as ethane, propane and butane that occur in some shale fields and fetch higher prices than natural gas.
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