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Haynesville Shale Still on Front Burner for New Capacity Plans

Interest in the Haynesville Shale shows no sign of waning anytime soon. Last week came three more big announcements to expand pipeline capacity from the natural gas shale play.

"Haynesville is HOT," analysts with Tudor, Pickering, Holt & Co. Securities Inc. said Friday. "If there is truly enough gas to fill all these lines (function of rig count, not geology), [a] much bigger issue is, how does gas get out of Perryville [Hub]?" That is a question for another day. In the meantime, the announcements just keep on coming.

On Thursday affiliates of CenterPoint Energy Inc. and FPL Group Inc. said they had formed a joint venture (JV) to "explore" whether to build a pipeline to carry up to 2 Bcf/d to markets in North Louisiana and to CenterPoint's Perryville Hub. An open season, as yet not scheduled, would determine whether the parties move forward.

Under the joint development agreement, CenterPoint's pipeline subsidiary and FPL Group's NextEra US Gas Assets LLC would own an equal equity interest in the pipeline; CenterPoint's pipeline group would design and oversee construction and operate the pipeline. The specific facilities required would "be a function of the location and volume commitment of potential shippers," the companies said.

"Gas production in north Louisiana, including the rapidly developing Haynesville Shale, remains robust and we are committed to finding a solution to assist producers with Haynesville and North Louisiana acreage to create another pipeline option for their production," said Greg Harper, senior vice president of CenterPoint Energy's Pipeline Group.

Final pricing would be based on the facility costs, the level of firm commitments and the amount of interest indicated in accessing specific markets. Long-term pipeline capacity commitments are considered necessary to move the project forward. Assuming adequate expressions of interest are received and the companies approve the proposal, a joint venture entity would be formed to execute binding precedent agreements and seek regulatory approvals.

Regency Energy Partners LP also on Thursday said that in December construction will begin on the second phase of the Logansport Gathering System expansion to serve growing gas production in northwestern Louisiana. The Dallas-based partnership in September said it would construct the Logansport Expansion to extend its Nexus Gathering System, which would add about 300 MMcf/d of gathering capacity to the system from DeSoto Parish, LA (see NGI, Sept. 21).

For the Phase II expansion, Regency plans to build 4.5 miles of 10-inch diameter gathering lines, route 7.5 miles of 12-inch diameter pipe through more than 17 sections of dedicated acreage in DeSoto Parish, and add 3.2 miles of 24-inch diameter pipe to connect into its 24-inch diameter Logansport Phase I expansion. An associated amine treating facility also would be built. The Phase II expansion, scheduled for completion by the end of June, is expected to cost about $40 million.

The fee-based project "is a key component of our growth strategy," said Regency CEO Byron Kelley (see NGI, Nov. 9). Regency and its partners in September also plan to spend $47 million to build a pipe extension of their Haynesville Expansion Project in North Louisiana to increase capacity on the Regency Intrastate Gas System.

In addition to its Phase II expansion, Regency plans to increase the diameter of the previously announced 20-inch diameter, 17-mile Logansport Expansion pipeline to 24 inches. The Logansport Expansion pipeline is to interconnect with CenterPoint Energy Gas Transmission's CP Line to provide the Logansport system with 450-485 MMcf/d of capacity along the corridor that crosses the Gulf South East Texas Lateral and Energy Transfer Partner LP's proposed Tiger Pipeline. Regency said it would increase the Logansport system's incremental delivery capacities to Tennessee Gas Pipeline and to Louisiana Intrastate Gas by 100 MMcf/d and 30 MMcf/d, respectively.

Also last week Enterprise Products Partners LP and Duncan Energy Partners LP said they had received enough additional firm transportation commitments from shippers to support expanding the capacity of their recently announced 249-mile Haynesville Extension into northwestern Louisiana to 2.1 Bcf/d. The partners also ordered 42-inch diameter pipe, which is larger than what was originally planned.

Last month the partners' Acadian Gas LLC subsidiary said it would extend its Louisiana intrastate pipeline to give producers expanded access to markets via Acadian's existing 1,000-mile system in South Louisiana and connections to nine major interstate pipelines (see NGI, Nov. 2). Known as the Haynesville Extension, the project was initially intended to transport up to 1.4 Bcf/d from the Haynesville area through 36-inch diameter and 30-inch diameter pipeline that would connect to Acadian's existing system as well as its affiliated Cypress Gas Pipeline.

The extension is expected to be in service in September 2011. The project is designed to provide producers in the shale play with access to more than 150 end-use markets along the Mississippi River corridor between Baton Rouge and New Orleans, the companies said. Shippers would be able to access a rapid-cycle salt dome storage cavern, have the ability to make physical deliveries into the Henry Hub and benefit from more favorable pricing points, they said.

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