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Continuing Gulf Coast Takeaway Capacity Buildout Has Haynesville Focus

The Gulf Coast has seen major increases of pipeline capacity in such recent projects as Midcontinent Express and the Southeast Supply Header, but even more are on the way. Many of them are aimed at serving the production needs of such prolific plays as the Haynesville (northwest Louisiana and East Texas) and Fayetteville (Arkansas) shales.

The Energy Information Administration (EIA), which said 2008 was the most active pipeline construction period in a decade (see NGI, Oct. 5), described the Southeast/Gulf of Mexico-area additions as "massive." It added that capacity increases of 22.6 Bcf/d in this region "were three times the level of the previous year, while the 1,382 miles of new pipeline [were] nearly double the previous year's addition of 700 miles of pipeline. The estimated cost of the infrastructure additions was $3.3 billion, compared with the 2007 total of $2.5 billion."

EIA went on to say that while 2008 saw the most pipeline construction in a decade, 2009 was expected to come in second only to 2008.

This year there's "not a ton of them [new expansions] like in the last couple of years, but still quite a few," said Bentek Energy analyst Rocco Canonica. However, he cautioned that some of the proposed projects may eventually fall by the wayside because of competition. Also, expected growth in 2011 looks lighter in capacity than in the two preceding years, he said.

Much of the new infrastructure will be designed to tap the booming Haynesville Shale resource play, which several analysts believe may become the fastest growing shale play to date in the Lower 48 states.

There are still new projects being announced. Near the end of last month affiliates Enterprise Products Partners and Duncan Energy Partners said their Acadian Gas intrastate line will be extended into northwest Louisiana to give Haynesville producers more market access using Acadian's existing 1,000-mile system in South Louisiana with connections to nine major interstate pipes (see NGI, Nov. 2). The Haynesville Extension would transport up to 1.4 Bcf/d and also connect with Acadian's affiliated Cypress Gas Pipeline. The extension is expected to be in service in September 2011.

The most immediate addition on tap is the $1.1 billion Haynesville Shale Expansion of the Regency Intrastate Gas System (RIGS) in North Louisiana by Regency Energy Partners (see NGI, Sept. 15, 2008). At the time of the project's announcement the company said it had letters of intent from anchor shippers covering about 76% of the project's long-term capacity. However, in a hint of concern about potential overbuilding in the area, Regency cut back on its plans for the Haynesville expansion only about a month after announcing it, citing the market turmoil that was occurring in late 2008 (see NGI, Nov. 17, 2008). The project would retain more than 1 Bcf/d of the originally planned 1.45 Bcf/d capacity while cutting its cost to around $650 million, excluding capitalized interest and labor costs, said CEO Byron Kelley.

But the company was not through enhancing its Haynesville position. In September Regency announced the $47 million Red River Lateral extension of the Haynesville Shale Expansion, which would increase RIGS capacity by about 100,000 MMBtu/d (see NGI, Sept. 21a). The Red River Lateral would reach farther southwest to the west side of the Red River into Red River Parish, LA, an area considered to be one of the richest and most active in the Haynesville Shale, Regency said.

Both the expansion and lateral are expected to be in service by the end of this year, said spokeswoman Elizabeth McCormick.

Regency also announced in September the Logansport Expansion, which would add about 300 MMcf/d of capacity to its Nexus Gathering System in North Louisiana for delivery to CenterPoint's Line CP (see NGI, Sept. 14a). Logansport completion is anticipated in early 2010.

As many as six more expansions may come online next year, Canonica said. The larger ones include Spectra Energy's ETX [East Texas] Expansion Project, which was previously expected to begin providing phased-in service early in 2010 but because customer discussions are still under way, the project timeline is still being worked out, said spokeswoman Wendy Olson. ETX would include receipt points in Texas Eastern's East Texas rate zone for supplies from the Haynesville Shale, Bossier Sands, Cotton Valley and James Lime production areas (see NGI, March 16). ETX is expected to have 600 MMcf/d of capacity, but the project is designed to be scalable, so the final volume could be higher or lower, Olson said.

Boardwalk Pipeline Partners' Gulf South subsidiary completed construction and placed into service in January and February 2009 its Gulf Crossing project, which is an approximately 357-mile pipeline running from near Sherman, TX, to the Perryville, LA, area. It expects Gulf Crossing's peak-day capacity to increase from about 1.3 Bcf/d currently to 1.7 Bcf/d in the first quarter of 2010 when additional compression facilities are due to be to placed into service, subject to FERC approval.

Another Boardwalk unit, Texas Gas Transmission (TGT), has applied to the Pipelines and Hazardous Materials Safety Administration for authority to increase peak-day transmission capacity to approximately 1.3 Bcf/d on the Fayetteville Lateral and 1 Bcf/d on the Greenville Lateral. TGT said it would add compression facilities in this project and seeks a special permit to allow these laterals to be operated at higher operating pressures, in addition to replacing a section of 18-inch diameter pipeline. Under the Fayetteville Shale Compression Project, TGT is proposing to construct, own and operate two new compressor stations and expects the additional capacity to be in service during the first quarter of 2010.

In late June 2008 CenterPoint Energy Gas Transmission began a nonbinding open season for a fourth expansion of its 1.5 Bcf/d Carthage to Perryville (Line CP) system across the Haynesville Shale area. CenterPoint said it continued to receive expressions of interest in incremental capacity following the first three Line CP expansions. The first stages of the new project, which would add 274 MMcf/d of capacity, are now due to start service by April 2010.

CenterPoint also began an open season last August seeking an additional expansion of its core pipeline system in eastern Arkansas to serve growing Fayetteville Shale production. The pipeline anticipates that incremental capacity would be provided with additional compression and looping of Lines J and JM-1. No in-service date has been determined for this project, according to spokeswoman Leticia Lowe.

Pipeline affiliate CenterPoint Energy Field Services (CEFS) announced in early September long-term agreements with subsidiaries of EnCana and Shell to provide gathering and treating services for their growing Haynesville Shale production. CEFS also acquired the gathering facilities from EnCana and Shell in DeSoto and Red River parishes in northwest Louisiana. Under the agreement terms, the field services unit will expand the acquired facilities to gather and treat up to 700 MMcf/d from their existing throughput of more than 100 MMcf/d. The facilities expansion was expected to take about 18 months from the date of the announcement, Lowe said.

In another project targeting the Haynesville Shale, Energy Transfer Partners (ETP) announced last January that it plans to build Tiger Pipeline, a 178-mile system that would move Haynesville production to Louisiana interconnects with interstate pipes (see NGI, Oct. 26). Pending regulatory approvals, the pipeline is expected to be under construction by June 2010 and in service in the first half of 2011.

ETP and Kinder Morgan Energy Partners are partnering on developing Fayetteville Express Pipeline, a project with an initial capacity of 2 Bcf/d that would originate in Conway County, AR, and run eastward 185 miles through White County, AR, to an interconnect with Trunkline Gas in Panola County, MS. Fayetteville Express will cost about $1.3 billion and is expected to begin service by early 2011, pending regulatory approvals, ETP said.

ETP recently completed the 160-mile Texas Independence Pipeline, which can move 1.1 Bcf/d from the Bossier Sands and Barnett Shale plays in eastern and north-central Texas (see NGI, April 7, 2008). It originates just west of Maypearl, TX, and ends near Henderson in East Texas. With an increase of compression, the project may be expanded to more than 1.75 Bcf/d.

In holding an open season last April for its proposed LaCrosse Pipeline from Carthage Hub in East Texas to a southeastern Louisiana interconnect with Southern Natural Gas in Washington Parish (see NGI, April 6a), Enbridge Inc. touted as an attractive feature the fact that LaCrosse would bypass the traffic jam that some expect to develop at Perryville Hub in northeast Louisiana, with which several eastbound projects will either connect or pass nearby.

In reporting a successful open season in May, Enbridge said it anticipated that LaCrosse could move 1-1.8 Bcf/d from the Carthage Hub and the Haynesville play to interconnections with at least five to six and possibly as many as 12 market-area interstate pipelines across Louisiana and that Phase 1 of the line could be completed in early 2012. It would also provide outlets for the Fort Worth-area (Barnett Shale) and East Texas producing basins, the company said.

A 40-mile Phase 2 extension was recently added to the LaCrosse project; it would run from east of the Mississippi River in Pointe Coupee Parish, LA, to Franklinton, LA, near the Mississippi border, said spokeswoman Terri Larson.

Enbridge also said in late July it had entered into letters of intent with Chevron USA that could result in the $500 million, 100 MMcf/d Walker Ridge Gathering System (WRGS), an expansion of its central Gulf of Mexico offshore pipeline system. WRGS would provide gathering services to the potential Jack, St. Malo and Big Foot ultra-deepwater developments, Enbridge said. At this point Walker Ridge is expected to have a 2014 in-service date, Larson said.

ANR was also targeting Haynesville production when it held an open season earlier this year for the Haynesville Lateral (see NGI, April 6b), which would originate at the Carthage Hub area in Panola County, TX, near the Louisiana border and run through a point near ANR's Delhi Compressor Station east of the Perryville Hub in Richland Parish, LA, and on to an interconnection with the Southeast Supply Header. ANR said the lateral also would provide alternate export options for Barnett, Woodford and Bossier Sands shale production from the Carthage Hub area. Service is anticipated to begin in fall 2012.

Other major pipeline projects in the Gulf Coast include the Phase VIII expansion of Florida Gas Transmission (FGT), which involves construction of 483 miles of pipeline facilities in Alabama, Mississippi and Florida, and recently got a favorable final environmental review from FERC (see NGI, Sept. 21b). FGT wants to put the entire expansion, which is estimated to cost $2.45 billion, in operation by spring 2011.

Also, FERC has approved Transco's $248 million proposal (Mobile Bay South Expansion) to expand its system by 308,500 Dth/d to serve growing markets in the Southeast (see NGI, Sept. 14b). Construction began last summer and is expected to be completed in spring 2010.

How many and which of these projects advance remains to be seen. The odds for the CenterPoint and Regency projects are good, according to Bentek. Still, the firm noted more than a year ago that prices at Perryville were under pressure from new supplies moving into the area (see NGI, May 5, 2008). Bentek's Braziel told NGI that Enbridge's LaCrosse could alleviate some of the congestion around Perryville but ultimately would only move the Gulf of Mexico region capacity constraint eastward, which would still be a good thing, he said.

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