Natural gas gathering firms are lining up with expansions and new facilities to meet demand from producers in the fast-growing Haynesville Shale of Louisiana and East Texas.
Last Wednesday Tenaska Capital Management LLC (TCM) said construction has begun on its TPF II East Texas Gathering LLC (ETG), a high-capacity gathering system with multi-market capacity to serve the Haynesville Shale formation in East Texas.
Also on Wednesday CenterPoint Energy Inc. subsidiary CenterPoint Energy Field Services Inc. (CEFS) said it is expanding its gas gathering and treating services by 200 MMcf/d in the Haynesville Shale for subsidiaries of Encana and a Royal Dutch Shell plc subsidiary, pursuant to long-term agreements executed in September 2009 (see NGI, Sept. 14, 2009).
CEFS said the expansion along with the base facilities of the 700 MMcf/d system currently under construction brings the total capacity to 900 MMcf/d. Known as the Magnolia Gathering System, the facilities will be located in DeSoto and Red River parishes in northwest Louisiana.
CEFS estimates that the cost for the 200 MMcf/d expansion will be $50 million and $70 million. The expansion will require 1,000 gallons per minute of additional treating capacity and looping of the existing gathering trunk line, and is expected to be placed into service by the first quarter of 2011. CEFS said construction of the 700 MMcf/d base facility is running ahead of schedule with substantial volumes flowing. It is expected to be fully in service by year-end.
“The agreements with Encana and Shell for the expansion of base facilities include additional minimum volume commitments and exclusive rights to gather and treat their natural gas production from the dedicated acreage in the contract,” said C. Gregory Harper, senior vice president and group president of CenterPoint Energy’s Pipelines and Field Services group. “This expansion further increases our foundation of fee-based revenues.”
The long-term supply agreements are with Encana Oil & Gas (USA) Inc. and Shell subsidiary SWEPI LP.
CEFS owns and operates approximately 3,800 miles of gathering lines and processing plants that collect, treat and process gas from approximately 150 separate systems located in major producing fields in Arkansas, Louisiana, Oklahoma and Texas.
Over in East Texas, as manager of the $2.4 billion TPF II, LP private equity fund, TCM said the 110-mile, 24-inch ETG system will have a design capacity of more than 1 Bcf/d and will initiate gas deliveries by mid-2010.
According to TCM the system will traverse the Texas portion of the Haynesville Shale gas producing formation in Nacogdoches, San Augustine, Sabine, Shelby and Panola counties, an area where production requires additional pipeline capacity to provide adequate access to markets. TCM noted that ETG will interconnect with multiple pipelines in the region.
“This high-capacity gathering pipeline will be a critical element serving shale gas producers in the region and is a reflection of the confidence TCM has placed in the potential for the Haynesville Shale formation,” said TCM CEO Paul Smith. “Shale gas plays are the focus of intense industry interest today, given the advanced technologies that are allowing production of gas that was previously unobtainable. The Haynesville formation has the capacity to be one of the most productive of the deep shale formations in the U.S.”
Smith said his company has already entered into agreements with multiple producers “covering a material portion” of the pipeline’s capacity. “We will be providing gathering services required by our producer customers with excellent flexibility to redeliver gas to key local and interstate markets in East Texas.”
Since early 2008, development in the Haynesville Shale has really taken off. As the production ramps up, so does the need for midstream services. Earlier last month Onshore explorer Petrohawk Energy Corp. agreed to sell a half interest in its Haynesville Shale gathering and processing business in northwest Louisiana to Kinder Morgan Energy Partners LP for $875 million in a transaction that would create the largest Haynesville gathering and midstream business (see NGI, April 19). The joint venture, to be named KinderHawk Field Services LLC, would share profits in more than 170 miles of pipeline now in service, which would increase to about 375 miles of pipeline with projected throughput of more than 800 MMcf/d by the end of the year.
Also earlier last month, Enterprise Products Partners LP agreed to pay M2 Midstream LLC $1.2 billion to buy two natural gas gathering and treating systems that run through the Haynesville/Bossier shales, as well as the Cotton Valley and Taylor sands formations in Louisiana and East Texas (see NGI, April 5).
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