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Perryville: Crossroads for Shale Gas, Power Gen

Much of the pipeline capacity into and out of the Perryville Hub in North Louisiana handles gas from the Haynesville/Bossier Shale in North Louisiana, as well as the Barnett, Fayetteville, Woodford and Eagle Ford shale plays. With gas demand from power generation growing up on the other side of the hub, and the potential for liquefied natural gas (LNG) exports from South Louisiana, Perryville pipeliners are streamlining trading operations.

CenterPoint Energy Gas Transmission Co. LLC (CEGT) has filed with the Federal Energy Regulatory Commission (FERC) to establish a Perryville Hub Trading Point (PTP) to be accessed for primary or secondary receipts/deliveries using the company's firm and interruptible transportation and wheeling services. The filing joins another made last month by Boardwalk Pipeline Partners LP's Gulf South Pipeline Co. LP that seeks approval for a new gas exchange service at Perryville.

The PTP would have access to receive or deliver gas from the 21 interconnects CEGT, a unit of CenterPoint Energy Inc., has with interstate pipelines in Perryville Hub. CEGT also proposes to establish the PTP as a site for trading or title transfers of gas among the company's shippers and/or nonshippers.

"The PTP will provide access to numerous supply basins and markets from which to transport or wheel gas to points on the CEGT system and the broader interstate pipeline grid," said Poe Reed, chief commercial officer of CenterPoint Energy's pipelines business.

CEGT also has applied to list the PTP as a trading point on Intercontinental Commodity Exchange (ICE), allowing users to manage risk in real time. Reed said with the addition of the ICE point, the PTP would provide new and existing customers, including growing electric power and storage markets, a liquid point to buy and sell gas.

"To match up a buyer and seller today, the shipper who brings gas into the Perryville Hub area has to know who's a buyer out there...What we're establishing with the PTP is a paper aggregation point that will allow the aggregation of gas from numerous spots," Reed told NGI's Shale Daily. "When you combine it with the ICE platform, what you bring those power generators and downstream markets is the liquidity and ease of doing business that the combination of the Perryville trading point and the ICE point bring the supply and the market."

Gulf South's previously announced Perryville Exchange Service (PXS) would provide customers with a streamlined process to facilitate the trading of gas across multiple pipeline interconnects in a 70-mile area near Perryville, the pipeline said. "Boardwalk has the unique pipeline connectivity to bring these supplies and markets together, and the Perryville Exchange Service creates a simple, appropriately priced service that should enhance liquidity and transparency for suppliers, marketers and end-users," said Boardwalk Chief Commercial Officer John Haynes at the time of his company's FERC filing.

Reed said he did not necessarily see Gulf South's PXS as a competitor or a complement to what CenterPoint is planning to offer. "I view them as the same thing on different pipes. I don't really view them as a complement or a competitor. Others may have a different view of that," he said, noting that CenterPoint will offer ICE trading while that is not in the Gulf South plans.

Forces driving the evolution of Perryville two years ago were coming more from the supply side, Reed said. Now the demand for Perryville services is coming more from the market end, particularly from the power generation market.

Next year Perryville Hub is to directly connect with Perryville Gas Storage, 7 Bcf high-deliverability project, further increasing liquidity and creating additional opportunities for customers of CEGT and affiliate Mississippi River Transmission, CenterPoint said. Besides this, Cardinal Gas Storage has multiple storage projects in the Perryville area. High-deliverability, multi-cycle salt dome gas storage is just the thing for accommodating swings in gas demand from power generators.

The rising prominence of Perryville as a trading point has been on the radar of CenterPoint and other industry players for a while now. Two years ago at a Houston conference on Perryville, CenterPoint's Carol Burchfield, vice president of business development, outlined how shale basins were shifting gas flows.

"We really believe at CenterPoint that [the] Haynesville [Shale], along with the other shale gas, will supplement and maybe even replace some of the traditional basins that we've seen filling up the pipes to the Northeast," Burchfield said in March 2010. "I think with all this gas-on-gas competition we're seeing at Perryville, the downstream markets are going to be more and more important to the producers."

If exports of domestically sourced liquefied natural gas (LNG) from the Gulf Coast become a reality, Perryville and the gas storage capacity around the hub will be set up to be in the middle of a lot of that activity, Reed said.

"I do think storage to the extent that export capability develops -- and there's certainly a question about how much of that will develop -- but if it does, storage will certainly play a part, much as I believe it would have played a part on the [LNG] import side," Reed said. "The storage connected to the hub can play a part in that, and then the pipes that we deliver to will also play a part in that.

"A whole bunch of the gas that's getting produced out of these shale plays is passing through North Louisiana. Us having the connectivity to then get that onto a pipe that will get it to an export facility, we'll be right in the middle of that."

CenterPoint said it expects the PTP tariff sheets to go into effect in May. For customer information contact CEGT's Mike Stoll at (314) 991-7405 or Amrish Patel (713) 207-5173.

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