Shale Daily / NGI All News Access

Shell, Williams Launch Marcellus Venture for Wet, Dry Natural Gas

Williams Partners LP and a unit of Royal Dutch Shell plc have partnered on an ambitious midstream venture to invest in natural gas liquids (NGL) and dry gas handling infrastructure to serve Marcellus and Utica shale operators in northwestern Pennsylvania and northeastern Ohio.

Three Rivers Midstream initially would anchored by a long-term fee-based dedicated gathering and processing agreement for Shell's production in the area, including close to 275,000 dedicated acres. Other agreements are being pursued with producers in the liquids-rich areas.

A 200 MMcf/d cryogenic gas processing plant and related facilities are to be built at a location still to be determined. As envisioned, the large-scale gas processing complex would be expandable as business grows. The initial plant is slated to be in service before the middle of 2015.

"This new joint venture builds on our strategy of creating large-scale infrastructure solutions that will provide Shell and other producers with access to the best markets for their natural gas and natural gas liquids, whether they be in the Northeast or the Gulf Coast," said Williams CEO Alan Armstrong. Williams controls about 70% of the pipeline partnership.

Williams has made no secret of its desire to build a lot of natural gas infrastructure in the Marcellus region. Late last year it acquired a half-stake in Chesapeake Energy Corp.'s former midstream operations, now Access Midstream Partners GP (see Shale Daily, Dec. 13, 2012).

However, Armstrong in February said the company was moving away from building Marcellus liquids fractionation and instead eyeing a NGL pipeline (see Shale Daily, Feb. 25). A week later, Williams and joint venture partner Boardwalk Pipeline Partners LLC proposed the Bluegrass Pipeline System to carry Marcellus and Utica liquids to Gulf Coast markets (see Shale Daily, March 7).

According to Armstrong, Three Rivers would connect to two big possible developments in Pennsylvania, the Bluegrass, as well as Shell's proposed world-class ethylene cracker in Beaver County, PA; a feasibility analysis still hasn't been completed (see Shale Daily, March 16, 2012).

"Similar to our strategy of creating a significant supply hub in the dry gas area of northeast Pennsylvania, Three Rivers will create a major supply hub in northwest Pennsylvania, but with the added benefit of large-scale natural NGL pipeline infrastructure and expanded market options to support wet-gas production in this area," Armstrong said.

Williams Partners initially would own most of Three Rivers and operate the assets. Its portion of capital expenditures (capex) for the Three Rivers plant, not including the gathering system, is estimated at $150 million. Subsequent capex is expected as business and scale increase. Shell, whose investment was not disclosed, would have the right to invest capital and increase its ownership prior to mid-2015, according to Williams.

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