Haynesville shale gas

With all the dismal economic news of late, pipeliners will no doubt take heart that there is one area of the country where things are on the upswing. It is in the Ark-La-Tex region, where the Haynesville shale oil and gas reserves are located. As upstream operators step up their exploration and production activities in the Haynesville Shale, midstream companies and natural gas pipeline operators are making plans to build the transportation infrastructure needed to get this new gas to market.

Two key players in this arena are DCP Midstream Partners and M2 Midstream, which recently announced an agreement to develop a new intrastate pipeline designed to serve the needs of the Haynesville Shale gas producers. The project would involve the construction of a new large-diameter pipeline that would move gas from the North Louisiana portion of the emerging Haynesville Shale play. The new pipeline, dubbed the Haynesville Connector, would be an extension of DCP’s existing Pelico Intrastate Pipeline. Early plans call for the line to originate in western DeSoto Parish and extend over 150 miles to Delhi, Louisiana, providing access to existing takeaway systems such as the Southeast Supply Header, and other systems owned by Columbia Gulf Transmission, ANR Pipeline, Trunkline Gas Company, Texas Gas Transmission, Tennessee Gas, Centerpoint Energy and Gulf South Pipeline. If built, the Haynesville Connector is expected to commence initial deliveries in the third quarter of 2009, and offer an estimated 1.5 Bcfd of takeaway capacity by early 2010.

“Producers in the Haynesville-Lower Bossier shale area in East Texas and North Louisiana are enthusiastic about results from initial wells which are meeting or exceeding their expectations, and these results are bolstering forecasts for natural gas production in the area,” says Mark Borer, president and CEO of DCP Midstream. “DCP and Momentum are well positioned to provide critical pipeline infrastructure to serve the near-term needs of Haynesville Shale producers by leveraging Pelico’s existing infrastructure, located within the core geography of the shale.”

Currently, DCP’s Pelico Intrastate Pipeline serves numerous intrastate and interstate markets, including the Perryville Hub, and is strategically located to facilitate the transportation of Haynesville Shale gas to those markets and to growing markets in the eastern and northeastern areas of the United States. The Pelico assets, along with additional gathering assets owned by DCP and Momentum, can help provide an interim solution to producers’ natural gas delivery needs in advance of the Haynesville Connector construction timeline.

“Momentum and DCP have been working on the Haynesville Connector for several months in order to provide Haynesville Shale producers with access to a long-term takeaway solution on an accelerated timeline,” says Frank Tsuru, President and CEO of Momentum. “Our complementary skill sets will insure a well designed pipeline is built on schedule with a focus on customer service. We look forward to working with DCP on this significant opportunity to be part of this emerging natural gas play.” The DCP and Momentum joint venture remains subject to the execution of definitive agreements.

Another notable Haynesville shale gas pipeline project is being planned by Dallas-based Regency Energy Partners, which has announced a $1.1-billion plan to expand its North Louisiana pipeline system. “By launching this project to expand our existing midstream infrastructure in the heart of the Haynesville shale, Regency has a ‘first-mover’ advantage in meeting existing and future demand,” says Regency chief executive Byron Kelley. “We expect significant drilling in North Louisiana for many years, and our strategic footprint in the region together with the incremental capacity from this project will position us well to handle this growth.”

Kelley says the expansion of the Regency Intrastate Gas System will provide 1.45 Bcfd of new capacity to handle expected increases in production from the region. He adds that Regency has letters of intent for long-term transportation agreements from anchor shippers covering about 76% of the incremental capacity, and is also seeing strong demand for the remaining capacity. The Haynesville expansion project includes looping the existing pipeline, extending the system and adding new compression.

If you are interested in the Haynesville shale, be sure to keep your eyes peeled for the Haynesville Shale Playbook. This exclusive special report is a collaboration of the staffs of PipeLine and Gas Technology, E&P, and Oil and Gas Investor, and will be available in March.