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Energy Transfer, Regency Targeting Permian with $700M NGL Line

Lone Star NGL LLC -- a venture of Energy Transfer Partners LP (ETP) and Regency Energy Partners LP -- plans to construct a 530-mile natural gas liquids (NGL) pipeline from Winkler County in West Texas to the Jackson County processing plant in Jackson County, TX.

"The dramatic increase in drilling in the Permian Basin has highlighted the need for additional NGL takeaway capacity from West Texas, and Lone Star is strategically positioned to provide this essential service to producers," said Greg Bowles, Lone Star senior vice president.

Lone Star has secured capacity on ETP's recently announced NGL pipeline from Jackson County to Mont Belvieu, TX. The Lone Star project is expected to have a minimum capacity of 130,000 b/d with potential for expansion. More than 65% of planned capacity is subscribed with key producers and processors under 15-year agreements, the partners said. The project is expected to be completed by first quarter 2013 at a cost of about $700 million, of which Energy Transfer will pay 70% and Regency will pay 30%.

Petrohawk Energy Corp. is among producers that have turned to the Permian for liquids-rich production. "The addition of the Permian Basin completes our vision of a well crafted asset base where we can leverage our operational expertise -- with a balanced portfolio of oil and gas opportunities," CEO Floyd C. Wilson said last month (see Shale Daily, May 10).

Lone Star owns and operates NGL storage, fractionation and transportation assets in Texas, Louisiana and Mississippi, including a 1,066-mile NGL pipeline and 43 million bbl of storage capacity at Mont Belvieu. The venture is planning to construct a 100,000 b/d NGL fractionation facility at Mont Belvieu (see Daily GPI, May 6).

Energy Transfer Equity LP (ETE) Chairman Kelcy Warren recently said, "Lone Star is near capacity" in West Texas. "We can add a little bit relatively efficiently by adding pumps...Other takeaway capacity is full or near capacity now. I personally see a train wreck coming. We need more capacity soon or it's going to be a problem. We're committed to doing that..." (see Shale Daily, June 17). ETE owns the general partner and 100% of the incentive distribution rights of ETP and Regency.

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