Eagle Ford Shale Midstream Assets Coming

By Eric Fox | December 06, 2010 AAA

The Eagle Ford Shale is one of the most active oil and gas plays in North America, with dozens of exploration and production companies staking out claims to acreage across the area. Midstream infrastructure is also needed in the Eagle Ford Shale to gather, process and transport the large amounts of production anticipated in the future.
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Eagle Ford Shale
The Eagle Ford Shale underlies a large area of Texas, and has been separated into fairly well defined dry gas, oil and wet gas sections. Operators currently like the oil and wet gas sections since higher revenue can be derived from wells there due to the higher price of crude oil relative to natural gas.

Fractionation
Enterprise Products Partners LP (NYSE:EPD) and Duncan Energy Partners L.P. (NYSE:DEP) recently expanded a facility in Texas that provides natural gas processing and liquids fractionation services. Fractionation is the process in which natural gas liquids are separated into the individual components.

The expansion will help serve the increased production from the Eagle Ford Shale. It raised the capacity of the facility to 77,000 barrels per day. Enterprise Products Partners L.P. also just announced that the company would build a storage facility and pipeline to bring crude oil from the Eagle Ford Shale to existing refineries in Houston.

Copano Energy (Nasdaq:CPNO) is also expanding its fractionation capacity to serve the anticipated production from the areas of the Eagle Ford Shale. The company will spend $60 million to increase capacity to 44,000 barrels per day. The extra capacity will come on line by September 2011.

Copano Energy is partnering with Kinder Morgan Energy Partners, L.P. (NYSE:KMP), and has signed agreements with two publicly traded exploration and production companies to help fill this capacity. In July 2010, the company signed a deal with SM Energy (NYSE:SM) to provide gathering, transportation and processing services for 10 years. Copano Energy and Kinder Morgan will also build 85 miles of pipeline in the Eagle Ford Shale as part of the agreement.

In November 2010, Copano Energy and Kinder Morgan signed a similar deal with Chesapeake Energy (NYSE:CHK) to handle production from the company's properties. The deal is for 14 years and will start up in September 2011.

Targa Resources Partners LP (Nasdaq:NGLS) owns Gulf Coast Fractionators along with Conoco Philips (NYSE:COP) and Devon Energy (NYSE:DVN). Gulf Coast Fractionators is expanding the capacity of its natural gas liquids fractionation facility located in Mont Belvieu, Texas. The expansion will increase capacity by 42% to 145,000 barrels per day and will be in service by 2012.

Bottom Line
The exploration and production industry likes the Eagle Ford Shale because of the high liquids content of wells here, and the processing facilities to handle these liquids are being built by many different players. (To learn more, see Oil And Gas Industry Primer)

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