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Atlas Adding Permian Processing, Expanding Pioneer Contract

Atlas Pipeline Partners LP and Pioneer Natural Resources have expanded an existing gas processing agreement that will lead to the construction of 200 MMcf/d of additional cryogenic capacity to serve production from the Permian Basin in West Texas.

The agreement extends their contract for 10 years (through 2032) and extends an area of mutual interest in hot Permian counties Martin and Andrews in Texas. Atlas said it will construct an incremental 200 MMcf/d cryogenic facility in the northern part of the Permian, scheduled to enter service in the second half of 2015. The Pioneer extension is under similar contract terms as the counterparties' existing contract.

The plant is to be integrated with Atlas' WestTX gathering and processing system, which currently has 455 MMcf/d of capacity and more than 3,600 miles of gathering infrastructure. The new processing capacity is in addition to the Edward facility, another 200 MMcf/d cryogenic plant that was announced last year and is expected to be in service early in the fourth quarter (see Shale Daily, July 17, 2013).

Upon completion of these additions, Atlas will have 855 MMcf/d of processing capacity in the Permian. Construction and installation costs for the plant are expected to be $100-120 million net to the partnership. The majority of the capital is to be invested in 2015.

"The announcement of this new, incremental plant, even before the Edward facility has been installed, indicates activity continues to exceed expectations for the play," said Eugene Dubay, CEO of Atlas Pipeline Partners. "By the second half of 2015, we will have installed three state-of-the-art 200 MMcf/d cryogenic plants in the Permian Basin in less than 30 months. We will continue to work to provide even better service to our over 100 producing customers in the Permian Basin."

Total Texas natural gas production from the Permian Basin is down a bit so far this year compared with 2013 and 2012, according to Railroad Commission of Texas data. In January production was running at 3.14 Bcf/d, down from about 3.25 Bcf/d in 2013 and about 3.16 Bcf/d in 2012. In 2011 production was 3.05 Bcf/d.

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