Looking to expedite and streamline the process of getting Rockies natural gas flows to western and eastern markets, Questar Pipeline Co. and an affiliate of Enterprise Products Partners LP have entered into a memorandum of understanding to develop a natural gas pipeline hub in Colorado, the companies said Monday.

As proposed, the White River Hub would be a header system that will be owned equally by the two companies. The facilities would connect Enterprise’s gas processing complex near Meeker, CO, with up to six interstate pipelines in the Piceance Basin area, including Questar Pipeline.

As initially designed, the 30-inch diameter hub pipeline would have the capacity to transport more than 2.5 Bcf/d and would provide hub-related services for gas producers, marketers and purchasers in the area. The White River Hub pipeline would extend about seven miles from Questar Pipeline’s Greasewood, CO, facilities to the nearby Enterprise Meeker gas processing complex.

In addition to Questar, pipelines expected to be connected to White River Hub are the Rockies Express Pipeline (REX), owned by Kinder Morgan, Sempra and ConocoPhillips; Kinder Morgan’s TransColorado Gas Transmission Co.; El Paso’s Wyoming Interstate Co. and Colorado Interstate Gas Co.; and the Williams-owned Northwest Pipeline Corp. The hub system would allow shippers on these pipelines to access markets throughout the country.

“The key thing that producers like is the ability to deliver to as many markets as possible, and certainly those markets that have good value for them,” said Shelley Wright, Questar director of business development. “We believe that this hub will provide flexibility to get producers to the higher value markets. That’s really what they’re asking for.”

Wright said the open season for the project would likely be announced Monday or Tuesday. Total cost of the project is projected to be less than $38 million, the companies told NGI, noting that 30-inch diameter pipe has been secured and labor is not expected to be too difficult to obtain.

“As natural gas production in Colorado’s Piceance Basin and Utah’s Uinta Basin continues to grow in importance to the nation’s overall supply, the White River Hub will help facilitate flows out of the area onto long-haul pipelines serving eastern and western markets in the United States and will bring additional value to shippers on Questar Pipeline’s system,” said Questar Pipeline CEO R. Allan Bradley. Questar Pipeline is a wholly owned subsidiary of Questar Corp.

Under the terms of the memorandum, Questar Pipeline will construct and operate the pipeline. Additionally, as foundation shippers, Enterprise has committed to 1.5 Bcf/d of firm capacity and Questar Pipeline has committed to 0.5 Bcf/d of firm capacity. An open season offering for the remaining firm capacity will be held immediately. Pending the results of the open season and regulatory approvals, the proposed pipeline is expected to be constructed in the summer of 2008 and be in service during the fall of 2008.

“The new hub offers Enterprise the opportunity to significantly expand our capabilities to provide customers with enhanced connectivity to critical interstate pipeline systems, and represents the next logical step in our ongoing Rockies growth initiative,” said Enterprise CEO Michael A. Creel. “Consistent with Enterprise’s integrated value chain philosophy, construction of the White River Hub complements our new Meeker complex and our Piceance Creek Gathering System, which will both play an important role in supplying the market with natural gas and natural gas liquids.”

The Meeker cryogenic processing plant in Rio Blanco County, CO, is due to come on-line with its first train any day now. That will provide processing capacity of 750 MMcf/d with the capability to produce 35,000 b/d of natural gas liquids (NGL). The second train is planned to come on-line in the third quarter of 2008 and will double those numbers.

Enterprise COO Bill Ordemann told NGI that the plant provides services under a portfolio of contracts — keep-whole, percent of proceeds, etc. — that allow for risk management and operational flexibility. NGL output can be turned down to about 3,000 b/d when necessary. “That’s how we’re protecting ourselves,” Ordemann said. “We’ve taken some significant keep-whole risk, but we’ll have the technical ability to control that and not have to produce those liquids.”

He said Enterprise was contemplating going it alone on the header system project and had talked with a number of other pipes besides Questar as well. “Really, Questar had the same alignment [on the project] as we did,” he said.

According to Bentek Energy LLC, Uinta-Piceance basin production is up about 39% (more than 720,000 Dth/d) over last year at about 2.6 Bcf/d currently. “At the rate that production is growing and expected to grow in the Rockies, the industry expects to fill up the Rockies Express pipeline very quickly — possibly within three years of service,” Bentek’s Rocco Canonica told NGI. “But even today it’s important for producers to have that flexibility to move gas around to other pipelines. Questar is strategically position to operate as a hub-like system for Piceance gas, so this project makes good sense.”

Additionally, Canonica said, White River could wind up being a pricing hub to rival Opal, as it would have 2.5 Bcf/d of capacity compared to Opal’s 1.5 Bcf/d.

Ordemann and Wright both said there will still be more pipeline capacity out of the Rockies needed after the completion of REX.

“I think our view here at Enterprise is there’s going to need to be another major pipe out of the Rockies in some way, shape or form and we’ve got some people working on that now,” Ordemann said. “I think probably [it will be] eastbound. We’re still working on that.”

Wright said Questar sees opportunities to expand its Overthrust Pipeline out of the Green River Basin with additional compression. She said the production growth in the Rockies has been “phenomenal.”

Earlier this month Wright was among executives at the Colorado Oil and Gas Association’s Rocky Mountain Natural Gas Strategy Conference & Investment Forum who said REX would not be the last word on new pipeline capacity out of the region (see Daily GPI, Aug. 17). Kern River Gas Transmission Co. is one company contemplating an expansion that would take more Rockies gas to the West. John T. Dushinske, Kern River vice president of marketing and regulatory affairs, said the “signals are very strong” for another expansion within a short period of time.

Producers have been awaiting the full completion of the REX system, especially since a painful basis blowout in June. In analyzing pipeline capacity and gas flows, Bentek Energy LLC warned producers that things would remain difficult until REX Phase II comes on-line early next year (see Daily GPI, June 14). At the other end of the REX project in Ohio, Bentek said more takeaway capacity is needed to get the Rockies supplies to lucrative eastern markets (see Daily GPI, Aug. 10).

For information on White River Hub, contact Wright, Questar Pipeline, at (801) 324-2509 or Mike Smith, Enterprise, at (303) 820-5606.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.