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Crosstex Expands Midstream Infrastructure

Targeting natural gas and natural gas liquids (NGL) production from shale plays in Texas, Louisiana and Pennsylvania; and conventional production from the Gulf of Mexico, Crosstex Energy Inc. unit Crosstex Energy LP has completed and brought online two expansions of its natural gas gathering system in the Barnett Shale in North Texas and has reactivated its Eunice NGL fractionator in south central Louisiana.

The partnership said the gathering system expansions will "make a major contribution to gathered volumes," while reactivating the fractionator will give Crosstex operational flexibility, increased fractionation capacity and the ability to capture new NGL-related business. The two North Texas projects became operational in late March and the Eunice NGL fractionator became operational on Tuesday.

"We are capitalizing on the growth opportunities in both the Barnett Shale play in North Texas and in Southern Louisiana's energy corridor," said Crosstex Energy CEO Barry E. Davis. "We see tremendous upside for incremental business in both regions."

The North Texas gathering expansion included the construction of a $25 million, 15-mile pipeline extension to serve Barnett producers. The project, which is supported by volumetric commitments, includes a seven-mile low-pressure pipeline, an eight-mile high-pressure pipeline and a compressor station in southwest Tarrant County, TX, that provides customers with greater takeaway capacity to accommodate their transportation requirements. The partnership said the peak flow rate of the new gathering system in 2012 is anticipated to be more than 100 MMcf/d of processable gas. The pipeline extension's throughput during the first four years of operation is expected to be approximately 100 Bcf.

In addition, the partnership also entered into a 10-year firm gathering and compression agreement with an undisclosed Barnett producer for an additional 50 MMcf/d on its North Texas gathering system. Incremental investment required for the project is estimated to be less than $10 million.

"We expect higher gathered volumes in 2011, and anticipate both of these North Texas projects will make a meaningful contribution to the increase," Davis said. "We believe the peak flow rate from these projects will be 150-175 MMcf/d in 2012. We can take advantage of these low-cost, high-return investment opportunities due to the strategic position of our assets in the core of the Barnett Shale. We will continue to invest in these types of projects in North Texas."

In south central Louisiana, the Eunice NGL fractionator, which has been idle since 2007, was reactivated with the necessary equipment to accommodate 15,000 b/d of NGLs. Additional capacity of 21,000 b/d can be restarted as supplies grow.

"We have great flexibility to increase the utilization of our asset infrastructure in Southern Louisiana. Demand for fractionation and NGL handling is increasing as producers make liquids-rich gas production a priority," said Davis.

The Eunice start-up and expansion project will increase the partnership's existing fractionation capacity for liquids products from 40,000 b/d to 55,000 b/d. The initial incremental investment required to restart the fractionator is approximately $7.6 million, and the annual cash flow to be generated from the expansion will be approximately $3.5 million with current committed volumes.

The Eunice complex, which includes the fractionator and a gas processing plant, provides access to southern Louisiana petrochemical and refinery markets and the Dixie Pipeline Co.'s propane pipeline. The Eunice site includes a truck and rail unloading terminal that receives NGLs for fractionation from U.S. markets, including volumes from the Marcellus and other emerging shale plays, where there are limited markets and NGL infrastructure. In addition, the Eunice complex is connected to onshore natural gas supply in Louisiana, and shallow and deepwater production from the Gulf of Mexico.

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