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Regency's Capacity From Haynesville Poised to Double

January 18, 2010
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Construction of Regency Energy Partners LP's Haynesville Expansion Project is complete and the 121-mile line is undergoing testing and commissioning, Regency said last week. The project will transport gas from the Haynesville Shale, one of the fastest growing U.S. gas fields.

"The 36-inch [diameter] portion of the pipe flowed its first receipt gas in November 2009, and the 42-inch [diameter] portion of the pipe on the eastern end of the system will be ready for service and flowing gas within the next two weeks," Regency CEO Byron Kelley said last Tuesday.

Dallas-based Regency and its partners Alinda Capital Partners LLC and an affiliate of GE Energy Financial Services are the backers of the project, which in conjunction with their Red River Lateral more than doubles the Regency Intrastate Gas System (RIGS) in North Louisiana by adding approximately 1.2 Bcf/d of capacity.

The 1.1 Bcf/d Haynesville Expansion consists of the 25-mile, 36-inch diameter Bienville Loop; the 21-mile, 36-inch diameter Elm Grove Pipeline; and the 75-mile, 42-inch diameter Winnsboro Loop; as well as 14,200 hp of compression at the Elm Grove and Haughton stations.

The Red River Lateral adds approximately 12.5 miles of 36-inch diameter pipeline and approximately 100,000 MMBtu/d of capacity to the system (see NGI, Sept. 21, 2009). Both projects are expected to be ready for service and flowing gas concurrently.

A Regency spokeswoman said the volume of gas that will flow on the pipeline initially is not yet known. "...[V]olumes are dependent upon producers nominating gas onto Regency's pipe, and we have not been through our nomination period yet, so we won't know what the volumes will be until we have gone through that period and begin flowing gas at the beginning of February," she said.

While the Haynesville Shale attracts a lot of attention, production there isn't growing as rapidly as some might think, analysts at Tudor, Pickering, Holt & Co. Securities Inc. (TPH) said in a report Tuesday. "Because the Haynesville is such a visible play with large individual well production rates, many assume we are being swamped with Haynesville gas," the analysts wrote. "Relative to expectations, that simply is not occurring."

Actual Haynesville production of 1.2 Bcf/d last August was 8% higher (or 90 MMcf/d) than the TPH model prediction of 1.1 Bcf/d, the analysts said.

Regency's Haynesville Expansion and the Red River Lateral are underwritten by firm transportation agreements with 10-year terms; approximately 85% of projected revenues will come from reservation fees, Regency said.

Late last year Regency said it would begin building the second phase of its Logansport Gathering System expansion in December to serve growing Haynesville production (see NGI, Nov. 23, 2009).

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