Williams Partners L.P. (NYSE:WPZ) is planning a multibillion dollar investment program to build midstream assets to serve the development of oil and gas properties in the Marcellus Shale and other fast growing plays in the United States.
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Ownership Structure
Williams (NYSE:WMB) owns approximately 77% of Williams Partners L.P., and also owns the general partnership interest in the company.

Macro Overview
Williams believes that the growth in development of natural gas resources in the United States will continue in the long term, and that low prices for natural gas will encourage demand from many sources. The company expects most of this growth to come from the chemical industry, as well as from power generation. It also expects these trends to generate the need for midstream infrastructure to gather and process this production, and plans to be involved with that growth.

Marcellus Shale
Williams is building the Laurel Mountain Midstream system, in southwestern Pennsylvania, to handle Marcellus Shale production. This system consists of multiple compression stations, as well as gathering and processing assets. The company expects the gathering capacity of this system to reach 900 million cubic feet (Mcf) of natural gas per day by the end of 2012.

The Laurel Mountain Midstream system was originally held in a joint venture with Atlas Pipeline Partners, L.P. (NYSE:APL). Chevron (NYSE:CVX) acquired the ownership held by that company, and is now part of the joint venture. Williams is the operator and owns 51% of the system, with Chevron holding the balance.

Williams is also building out midstream assets in, northeastern Pennsylvania, to handle future Marcellus Shale production. The company purchased existing midstream assets, from here, in 2010 from Cabot Oil and Gas (NYSE:COG), and also has a number of expansion projects planned.

Williams' goal is to increase capacity here to 650 Mcf of natural gas per day by the end of 2011, and 1.2 billion cubic feet (Bcf) per day by the end of 2012.

Williams estimates that the two Marcellus Shale systems will have combined throughput volumes of 2 Bcf per day by 2013, and 2.75 Bcf per day by 2015. The systems will see more than 300 wells hooked up, annually, at the peak.

Other Operators
El Paso (NYSE:EP) is also investing in midstream assets, to serve the Marcellus Shale, and has budgeted $1.4 billion to add 1.5 Bcf per day in capacity.

Southwestern Energy (NYSE:SWN) just signed an agreement with Boardwalk Pipeline Partners, LP (NYSE:BWP) to build a natural gas gathering system, in Pennsylvania, to handle production from Southwestern Energy's wells in the Marcellus Shale.

Other Plays
The Marcellus Shale isn't the only shale play that Williams is targeting for new investments. The company is also investing in south Texas to serve the Eagle Ford Shale. Williams recently signed a deal with Copano (Nasdaq:CPNO) and Kinder Morgan Energy Partners, L.P. (NYSE:KMP) to bring production from this play to the company's Markham facility. Williams also has existing gathering assets in several areas in the western United States, including the Uinta, Piceance and Powder River Basins.

The Bottom Line
Williams is a safer method for investors to play the growth in domestic oil and gas drilling in the United States. The company is focusing much of its resources on the Marcellus Shale, where increased drilling is leading to intense demand for midstream and other infrastructure, to gather and process the resulting production stream. (For additional reading, take a look at What Determines Oil Prices?)

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Tickers in this Article: WMB, WPZ, APL, CVX, COG, EP, SWN, BWP

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