Kinder Morgan Energy Partners LP is holding an open season to test market interest in building an entirely new 700,000 Dth/d interstate pipeline that would transport growing gas production from the Bossier Sand and Barnett Shale exploration plays in northeastern Texas as well as imports from new LNG terminals along the Gulf Coast to pipelines in Louisiana.
At the downstream end of the new pipeline, Crosstex LIG is planning to extend and expand its system to accommodate the additional supply from the new Carthage line as well as production from growing supply basins in North Louisiana.
The proposed Kinder Morgan Carthage Pipeline would originate near Beckville, TX, and extend 38 miles to Stonewall, LA. The binding open season on the project continues through June 16. The pipeline would have receipt point interconnects with Natural Gas Pipeline Company of America, the 36-inch diameter Kinder Morgan Tejas/Enterprise JV Pipeline, Enbridge Energy Partners East Texas Pipeline's DD Line, the Markwest Plant and the Duke East Texas Complex, Kinder Morgan said.
Crosstex LIG said its expansion would include 65 miles of 36-inch diameter pipeline starting Natchitoches, LA and ending near Shreveport, at which point it will connect with the new Carthage system. Crosstex also plans to add new gathering laterals to enable North Louisiana producers to access the new line.
Within the existing LIG system, eight miles of pipeline will be looped to add capacity to move the large volumes anticipated. This additional capacity will benefit natural gas producers and shippers, which will ultimately translate into more reliable and reasonably priced natural gas to consumers, Crosstex said.
Crosstex estimated the cost for its portion of the project at $225 million, with cash flow estimated to be $40 million per year once the connection to the proposed Kinder Morgan line is completed. An engineering firm already has been hired by Crosstex to complete a project feasibility study by June 30. The expansion is expected to be in operation by summer of 2006.
"This expansion is consistent with our growth strategy of using successful past acquisitions as a platform from which to build," said Crosstex CEO Barry E. Davis. "As drilling activity increases, we're seeing opportunities for organic growth that our industry hasn't seen in many years, and we believe that the synergy of our existing assets combined with the relationships we have in this industry will give us a competitive advantage in these expansion projects."
This Kinder Morgan Carthage system is needed because producers have been successful developing large volumes of new gas production from the Bossier and Barnett Shale formations. However, the pipeline take-away capacity from these new fields has been limited, with most of the new capacity delivering the new production to the Carthage area where many interstate pipelines converge. Capacity to move gas east from Carthage has been limited.
In North Louisiana, producers drilling in fields such as Caspiana, Elm Grove, Holly and Sligo also have successfully developed new gas reserves. However, they too are now facing limited takeaway capacity from the production area into the gas transmission grid. Crosstex said its extension will be a competitive option for those producers, offering multiple interconnects to move gas into its intrastate markets as well as interconnects with pipelines owned by Columbia Gas Transmission, Tennessee Gas Pipeline, Trunkline Gas Company, Texas Gas Transmission and ANR Pipeline Company.
Kinder Morgan plans to file an application for the pipeline with the Federal Energy Regulatory Commission and build the pipeline with a targeted in-service date sometime in the second quarter of 2007. Shippers seeking additional information on the project should contact David Matney at (713) 369-9218 or Norman Watson at (713) 369-9219. Companies interested in acquiring firm 311 transportation capacity in the Crosstex LIG's expansion should contact John Durand at 214-953-9500.
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