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Gatherers Growing Deliverability in Haynesville

Separate announcements last week by Regency Energy Partners LP, Energy Transfer Partners LP (ETP) and CenterPoint Energy Field Services Inc. (CEFS) promise to build natural gas deliverability from the Haynesville Shale.

Regency said Friday it plans to construct an approximately $44 million pipeline extension of its Nexus Gathering System in North Louisiana. Called the Logansport Expansion, the project will add about 300 MMcf/d of gathering capacity to the system.

The expansion is expected to increase the overall deliverability of the Nexus Gathering System by adding approximately 17 miles of 20-inch diameter pipe, as well as associated compression and dehydration facilities. It will provide gathering customers with additional takeaway options in DeSoto Parish, LA, and Shelby County, TX -- areas currently experiencing significant drilling activity -- and expand Regency's presence in the Haynesville Shale, the company said. The expansion will transport gas gathered by Nexus to a 300 MMcf/d interconnect with CenterPoint Energy Gas Transmission's Line CP.

"With the rapid growth in the Haynesville Shale, the Logansport Expansion is intended to meet new gathering needs from our producer customers," said Regency CEO Byron Kelley. "Once complete, the expanded Nexus Gathering System will be well positioned for future growth, as it is the first of several anticipated expansions on this gathering system."

The expansion will be funded partially with proceeds from Regency's recent private placement, with the remainder financed under the company's revolving credit facility. The contracts will contribute additional fee-based margins to the company's gathering and processing segment once the project comes online. Regency has kicked off construction efforts on the project; completion is expected in early 2010.

ETP's proposed 180-mile Tiger natural gas pipeline to tap the Haynesville Shale received another vote of confidence last week in the form of a 10-year contract with an undisclosed shipper to transport 300 MMcf/d, bringing total capacity commitments on the project to at least 1.8 Bcf/d. To be constructed and operated solely by an ETP subsidiary, the Tiger Pipeline would carry gas from Carthage, TX, through the heart of the Haynesville Shale and terminate near Delhi, LA (see NGI, Feb. 2).

ETP's new capacity commitment is in addition to previously announced agreements that include a 10-year contract with EnCana Marketing (USA) Inc., a subsidiary of EnCana Corp., for 500 MMcf/d, and a 15-year contract with Chesapeake Energy Marketing, Inc., a subsidiary of Chesapeake Energy Corp., for 1 Bcf/d (see NGI, May 11; April 27).

Lee Hanse, senior vice president of ETP's Interstate Pipeline Division, said, "This volume commitment further demonstrates the need for additional pipeline capacity out of the increasingly active Haynesville Shale natural gas play. The construction of the Tiger Pipeline will help provide critical takeaway capacity and ensure that producers have flexibility and enhanced market access as they continue to develop this emerging resource."

ETP also filed an application on Aug. 31 with the Federal Energy Regulatory Commission requesting a certificate of public convenience and necessity to authorize construction and operation of the pipeline. Pending necessary regulatory approvals, the pipeline is expected to be under construction by June 2010 and in service in the first half of 2011.

The Tiger Pipeline would connect to ETP's dual 42-inch diameter pipeline system near Carthage with interconnects to at least seven interstate pipelines at various points in Louisiana that serve the Northeast, Southeast, Mid-Atlantic and Midwest markets. The pipeline will have an initial throughput capacity of 2 Bcf/d, which may be increased to up to 2.4 Bcf/d with added compression.

Also last week CEFS said it will provide long-term natural gas gathering and treating services in the Haynesville play for subsidiaries of EnCana and Royal Dutch Shell plc. The CenterPoint Energy Inc. subsidiary, which obtained agreements with EnCana Oil & Gas (USA) Inc. and Shell subsidiary SWEPI LP, also bought for an undisclosed sum the two producers' gathering facilities in De Soto and Red River parishes in northwest Louisiana.

C. Gregory Harper, group president of CenterPoint Energy's pipelines and field services group, said the agreements "extend our footprint in north Louisiana...give us a platform for scalable growth and position us to be a significant participant in providing natural gas gathering services in this important producing region."

CEFS plans to expand the newly acquired gathering facilities to more than 100 MMcf/d, which would allow it to gather and treat up to 700 MMcf/d. CEFS also could expand its facilities in the future, if EnCana or Shell agreed. Volume commitments also were included in the agreements, but the amounts were not disclosed. To increase the acquired facilities' throughput to 700 MMcf/d, CEFS plans to spend $300-325 million to add more than 200 miles of pipelines, nearly 25,500 hp of compression and more than 800 MMcf/d of treating capacity. If Shell or EnCana agreed to expand the facilities in the future, CEFS said it could invest "as much as $250 to $300 million" for additional facilities.

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