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Innovation:  small electric generators will use bottled up Marcellus gas for distributed electricity; small scale GTL plant for Houston gets greenlight to turn natural gas and ethane into transportation fuel

Pennsylvania’s IMG Midstream L.L.C. plans to supply the Marcellus shale region with at least a dozen 20 megawatt (MW) electrical generation stations to support regional production. The stations are intended to be placed close to the fuel source—the gas wells themselves— and circumvent the need to wait for further pipeline build, a problem that has road-blocked delivery of gas to end users in the Marcellus region during its unprecedented production growth the past decade.

Where a commercial scale 1100 megawatt (MW) power generation plant creates enough electricity to serve about 700,000 average homes, or approximately 2,000,000 people, the IMG plants are scaled to serve the local populous, about 26,000 homes.

Last week IMG presented plans to the Northern Tier Regional Planning and Development Commission in Wellsboro, Pa. to build nine 20-megawatt power stations in Bradford, Tioga, Susquehanna and Wyoming Counties.

The company’s business model is to site the plants close to natural-gas production and electric grids, minimizing the need for new infrastructure, a company spokesperson told the Philadelphia Inquirer.

IMG is targeting gas producers with a long-term market alternative which could help to improve netback pricing and deliver a local alternative for the monetization of gas, NGLs or processed ethane from producers throughout the Appalachian Basin.

IMG’s facilities are capable of utilizing fuel with Btu content exceeding 1,600 LHV (Btu/cubic foot).  Fuel supply to these facilities is flexible over time, which presents an opportunity for suppliers to deliver fuel supply to IMG based on wider market conditions for NGLs and/or natural gas.  By utilizing existing electrical grid infrastructure, IMG’s facilities can be sited to maximize the benefit of this fuel flexibility for participating suppliers. The price paid to producers per dekatherm (Dth) can be fixed, indexed to gas, indexed to power, based on an NGL price, or structured as a composite of select commodities and/or plant performance.

Each facility consumes approximately 4,000 Dth/day. Facilities are sized and located based on the availability and quality of fuel supply, electric infrastructure and market prices for electricity. One or multiple facilities can be constructed on a single gas gathering system and the plants are designed with a 20-year lifespan.

General Electric’s distributed power division will supply 10 Jenbacher J-624 two-stage turbocharged gas engines to IMG for two 20 MW projects, GE announced in August. Each of the Jenbacher units will deliver 4.3 MW of power. The initial two projects in Northeastern Pennsylvania are expected begin in 2015 and GE said there are 12 additional projects in development.

IMG is backed by Bregal Energy, a New York private equity investor with an array of energy investments involving power generation, exploration and production, transmission and renewable energy projects.

Houston Small Scale Gas-to-Liquids Facility Gets Green Light

California’s Greyrock Energy has received a final investment decision to deliver one of the world’s first small-scale Gas-to-Liquids (GTL) facilities near Houston.

The idea is to produce premium synthetic diesel fuel from natural gas or natural gas liquids (NGLs) using Greyrock’s GreyCat™ catalyst and Distributed GTL (dGTL) solution. Modular gas conversion can be achieved from a variety of abundant gas sources, including natural gas, NGLs (such as ethane), stranded gas resources and associated gas. Greyrock expects the Houston plant to be commercially operational by the end of 2015.

The project is being funded by a consortium of investors led by Dallas-based Sterling Private Capital and Eagle Oil & Gas Co.

“In addition to conversion of natural gas into fuels, we are very excited about the opportunity to convert NGLs, especially ethane, in geographies where ethane pricing is depressed and a challenge for producers to deal with,” said Pat S. Bolin, chairman of Eagle Oil & Gas Co., in a press release.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.