Dallas-based Kinder Morgan Energy Partners LP (NYSE: KMP) and Energy Transfer Partners LP (NYSE ETP) have entered a joint venture called Fayetteville Express Pipeline LLC to develop a $1.3-billion, 187-mile pipeline project to take gas production from the Fayetteville shale.
With an initial capacity of 2 billion cubic feet per day, the line will begin in Conway County, Arkansas, continue eastward through nearby White County, Arkansas, and end at an interconnect with Trunkline Gas Co. in Quitman County, Mississippi.
The new company will conduct a binding open season from Oct. 8 through Nov. 7.
The joint venture has secured binding 10-year commitments from Southwestern Energy Services, a subsidiary of Southwestern Energy Co., Houston, (NYSE: SWN) and Chesapeake Energy Marketing Inc., an affiliate of Chesapeake Energy Corp., Houston (NYSE: CHK).
Chesapeake’s plans are for firm transportation of 375 million cubic feet per day and an option for an additional 125 million cubic feet per day.
“We are pleased to announce that we have secured substantial new takeaway capacity for our Fayetteville shale production that will provide Chesapeake and our 25% partner, BP America, with improved access to more favorable natural gas markets at an attractive transportation rate,” says Chesapeake chief executive officer Aubrey K. McClendon. “This agreement helps to reduce both basis risk and pricing volatility and will accommodate the substantial growth we anticipate from the Fayetteville shale play in the years ahead.”
Southwestern Energy chief executive Harold Korell says, “We are pleased to enter into this agreement with Kinder Morgan and Energy Transfer and their jointly owned subsidiary, FEP, to provide us with additional transportation services for our Fayetteville shale play. Once built, the new pipeline will provide additional takeaway capacity to meet our projected production growth as well as access to premium markets.”
Plans for the pipeline that could be in operation by late 2010 or early 2011 will help a host of companies besides those building the pipeline, reports the Tudor Pickering, Holt & Co. Securities Inc. research team led by Dan Pickering. The line, the Pickering team reports, “will allow a lot of companies the chance to get their gas to markets.”
Kinder Morgan chief executive Richard D. Kinder says, “Adding new pipeline access and capacity in the Fayetteville shale through projects like this is important in meeting America’s future energy needs and limiting future hurricane interruptions to the marketplace. This pipeline project represents another exciting growth opportunity for KMP.”
Echoing those sentiments was Energy Transfer senior vice president Lee Hanse who says, “The project will provide shippers in the Arkansas Fayetteville shale with much needed take-away capacity, flexibility and access to markets.”
Permits with state and federal officials must still be filed. JAS
