Domestic gas producer XTO Energy Inc. said Wednesday it has signed a 10-year agreement with Energy Transfer Partners LP (ETP) for more than 700 MMcf/d of firm takeaway capacity on ETP’s major pipeline project beginning in 2007.

The agreement accommodates planned production growth from XTO Energy’s Freestone Trend and Barnett Shale development projects in Texas, the Forth Worth, TX-based producer said. XTO Energy has contracted to deliver its production into the newly proposed 264-mile pipeline from North Texas to East Texas, which Energy Transfer plans to build.

The agreement inked with Energy Transfer will increase XTO Energy’s takeaway capacity from the Freestone Trend and Barnett Shale project to approximately 1.10-1.45 Bcf/d by the end of the decade, the producer noted.

“We have just completed expanding our significant Freestone Trend infrastructure, clearing the way for volume growth to more than 700 MMcf/d,” said XTO Energy President Keith A. Hutton. “This new agreement with ETP accommodates the next phase of development growth in XTO’s natural gas volumes in Texas. Over the next decade, our development programs in East Texas and the Barnett Shale will require [even] more takeaway capacity.”

Dallas, TX-based Energy Transfer has approved a $454 million capital expenditure program to build approximately 264 miles of 30-inch, 36-inch and 42-inch diameter pipelines in Texas, while adding about 40,000 horsepower of compression.

Energy Transfer’s project is an “overall hydraulic solution” to correct the way the Texas pipe infrastructure was initially built, said Energy Transfer co-CEO Kelcy Warren. He noted that the Texas pipeline system was originally constructed to supply natural gas to markets near cities, not to gather gas hydrocarbon production from metropolitan areas. Planners never envisioned that producing areas like the Barnett Shale would crop up near Dallas-Fort Worth and become the most productive region in Texas. “We [have now] got more supply in this area than consumption by far.”

The project calls for the construction of an 85-mile, 42-inch diameter pipeline from Energy Transfer’s Bethel gas storage facility in Anderson County, TX, to its 30-inch diameter Texoma Houston Pipe Line facility in Rusk County, as well as additional pipelines. Energy Transfer also plans to construct a 36-inch pipeline from the intersection of its Forth Worth Basin and NTP Pipelines near Cleburne, TX, in Johnson County (south of Dallas), moving south and east to a point near Reed, TX, in Freestone County.

From that point, the pipeline will change into 42-inch diameter and will extend easterly to Energy Transfer’s Texoma Houston Pipe Line. There, a 36-inch diameter pipe will continue from the Texoma Houston Pipe Line to the Carthage, TX, hub. In addition, a 30-inch diameter pipeline (moving south to north) will be constructed to connect Energy Transfer’s Katy-Bossier system to the Cleburne-to-Carthage line near Reed.

When completed, the project will form a “big T,” said Warren. The expanded Energy Transfer system will tie in with almost all of the interstate gas pipelines that go into Texas, including Florida Gas Transmission, Trunkline, Transcontinental, Natural Gas Pipeline Co. of America, Texas Gas, Gulf South, El Paso and Northern Natural, he noted.

The intrastate pipeline project will provide throughput capacity of approximately 1.6 Bcf/d, the company said. With the XTO Energy agreement, Energy Transfer estimated that 55-60% of the firm capacity to be created by the project has been committed.

Warren said the Bethel-to-Texoma segment of the project is expected to be completed by June 2006. The other portions of the project are likely to be completed in 18 months, he noted.

Energy Transfer said the construction of the new lines would provide producers with firm capacity out of the rapidly expanding Barnett Shale, Freestone Trend and Bossier Sand producing areas to all market hubs in Texas and numerous interstate pipelines; provide ETP with the ability to fully integrate its Houston Pipe Line, Oasis, Katy-Bossier and Energy Transfer Fuel pipeline systems into one contiguous pipeline network and offer seamless transportation across its systems in Texas; and, with the expanding liquefied natural gas (LNG) facilities along the Gulf Coast, provide LNG customers alternative outlets across Texas and to other connection points.

Energy Transfer owns approximately 11,700 miles of natural gas gathering and transportation pipelines, gas treating and processing assets in Texas and Louisiana, and three gas storage facilities in Texas.

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