Marcellus Shale Infrastructure On The Way

By Eric Fox | December 07, 2010 AAA

The Marcellus Shale is being touted by the exploration and production industry as a large future source of low-cost natural gas. Along with this production, billions must be spent on infrastructure to process and transport the expected production.

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Williams Partners L.P. (NYSE:WPZ) is one of the most active players in the Marcellus Shale through its Midstream and Pipeline segments. The company is planning on spending $2 billion from 2010 to 2012 on various growth projects, with many targeting the expected Marcellus Shale region.

Williams Partners L.P, which is 77% owned by Williams (NYSE:WMB), just agreed to purchase the midstream assets of Cabot Oil & Gas Corporation (NYSE:COG) for $150 million. These assets are located in Susquehanna County, Pennsylvania, and include 75 miles of pipeline and two compressor stations.

Williams Partners L.P is also expanding the company's Springville system to serve the Marcellus Shale. The company's goal is to get its capacity in the region to 1.2 billion cubic feet per day by 2012 or 2013.

Buckeye Partners (NYSE:BPL) has proposed building the Marcellus Union Pipeline Project to transport natural gas liquids from wells in the Marcellus Shale. The pipeline would run approximately 400 miles from Pennsylvania and West Virginia, up through Ohio and Indiana, before ending in Michigan. The pipeline will have the capacity to transport 65,000 barrels per day of Ethane, and if approved, will be in service within the upcoming years.

In May 2010, DCP Midstream Partners, LP (NYSE:DPM) signed a letter of intent to form a joint venture with EQT Corporation (NYSE:EQT) to build natural gas and natural gas liquids infrastructure in the Appalachian basin. The joint venture will process the wet gas production of EQT Corporation from both the Marcellus and Huron Shale.

DCP Midstream Partners, LP will contribute $200 million for a 50% share of the joint venture and EQT Corporation will contribute $200 million of infrastructure assets to earn its share. The companies also hope to process production from third parties in the area.

DCP Midstream Partners, LP is looking for a substantial amount of growth out of the Marcellus Shale over the next few years. The company also entered into a joint venture with Magnum Hunter Resources (NYSE:MHR) to build a natural gas gathering system to serve West Virginia and Ohio. Magnum Hunter Resources has 42,000 net acres under lease in West Virginia that is prospective for the Marcellus Shale and needs a gathering system to get this future production from the wellhead to nearby pipelines.

The Bottom Line
The energy industry is moving forward on building the infrastructure needed to gather, process and transport natural gas and other hydrocarbons to market.

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