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Southern Union Project Targets Permian NGLs

Southern Union Co. said its Southern Union Gas Services (SUGS) midstream business will construct a 200 MMcf/d gas processing plant and associated gathering, compression and treating facilities to serve growing production from the Avalon, Bone Spring and Wolfcamp plays of West Texas and Southeast New Mexico.

The $235 million Red Bluff Project would build on an existing multi-phase midstream expansion developed as a response to producer needs in the Avalon Shale. As part of the project, SUGS said it will construct about 60 miles of pipeline to deliver up to 20,000 b/d of natural gas liquids (NGL) into Lone Star NGL's recently announced Permian-to-Mont Belvieu pipeline expansion, under a 15-year firm arrangement. Lone Star NGL is a venture of Energy Transfer Partners LP (ETP) and Regency Energy Partners LP; its project is expected to be completed in mid-2013 (see Shale Daily, June 23).

"With existing Permian Basin midstream infrastructure nearing capacity, Red Bluff provides long-term customer solutions for treating, processing and NGL takeaway and significant earnings growth opportunities for our stockholders," said Southern Union CEO George L. Lindemann.

Growing production from the Permian Basin has sparked a great deal of interest in additional NGL takeaway capacity from the region.

In recent days DCP Midstream said it would proceed with the previously announced Sand Hills Pipeline to carry NGLs from the Permian Basin and Eagle Ford Shale to markets along the Gulf Coast (see Shale Daily, Aug. 19). Separately, increasing activity in the Avalon and Wolfcamp shales and Bone Spring formation recently prompted Nuevo Midstream LLC to take its gas processing plant near Orla, TX, out of mothballs, the Houston-based start-up said last spring (see Shale Daily, May 10).

Southern Union Co. is an acquisition target of both Williams and Energy Transfer Equity LP (ETE) (see Shale Daily, Aug. 18). In building a case for his company's offer for Southern Union, ETE Chairman Kelcy Warren said recently, "We believe West Texas is perilously close to problems with takeaway NGL capacity." The Southern Union infrastructure there would alleviate some problems and give the combined company a more integrated system, he said (see Shale Daily, June 17).

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