Tennessee Gas Pipeline Co. (TGP) has executed binding 20-year term agreements with subsidiaries of Chesapeake Energy Corp. and Statoil for 100% of the capacity of its proposed Northeast Upgrade Project, which would provide 636,000 Dth of incremental firm transportation capacity from TGP’s 300 Line Project now under construction in the heart of the Marcellus Shale in Pennsylvania to an interconnect in New Jersey, the El Paso Corp. subsidiary said Tuesday.

TGP’s Line 300, which would provide 340 MMcf/d of capacity, is scheduled to be completed in 2011 (see Daily GPI, Dec. 11, 2009). The agreements for the Northeast Upgrade, with Chesapeake Energy Marketing Inc. and Statoil Natural Gas LLC, precede an open season, which is to launch later this month, El Paso said. Final capacity would be awarded in March.

“With the previously announced 300 Line Project, we will be adding approximately 1 Bcf/d of new firm capacity that will provide safe and reliable transportation of clean-burning, domestic natural gas supplies to key Northeast markets,” said El Paso Corp. CEO Doug Foshee.

A spring 2011 Federal Energy Regulatory Commission filing date is planned for the Northeast Upgrade, with a scheduled Nov. 1, 2013 in-service date. The project would cost an estimated $400 million; most of the capital spending would take place in 2013, said El Paso.

Chesapeake CEO Aubrey McClendon said the agreement “continues our practice of contracting for strategic pipeline capacity, which in this case provides access to premium northeast markets for our growing Marcellus production in northeast Pennsylvania. We have a long history of transactions with the El Paso family of companies, and this transaction continues that tradition, creating substantial value to both firms.”

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