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Firms form venture to expand Marcellus, Huron shale processing

Warren R. True
OGJ Chief Technology Editor

HOUSTON, May 27 -- Yet more infrastructure is in the works for shale plays in the eastern US.

EQT Corp., Pittsburgh, and DCP Midstream Partners LP, Denver, along with its sponsor DCP Midstream LLC, plan to form a gas processing and NGL infrastructure joint venture for EQT and third-party producers in the Marcellus and Huron shales of the Appalachian basin.

Under the letter of intent, EQT and DCP will pursue gas processing and related NGL “infrastructure opportunities,” said the companies’ announcement. The joint venture will be the preferred processor for EQT's wet gas in the Marcellus and Huron shale areas.

Ownership will be equally distributed between DCP and EQT. DCP would contribute about $200 million in cash in exchange for its 50% interest and would operate the new joint venture.

In exchange for its 50%, EQT would contribute “an equivalent value” in existing assets consisting of its 170-MMcfd gas processing plant at Langley, Ky., and a related 70-mile, 8-in. NGL pipeline in southeast Kentucky serving EQT's Huron shale production.

The JV would use the cash from DCP to fund the initial expansion to accommodate anticipated production growth by EQT and third-parties in the Marcellus and Huron shale.

EQT Pres. and Chief Executive Officer David L. Porges said the JV ensures the transportation and sale of EQT's liquids “through the addition of a highly capable partner,” reduces the incremental EQT capital required for investments in midstream projects necessary to support its growing produced natural gas, and allows EQT to retain a financial stake in the “profitable processing” of EQT's liquids-rich natural gas.

The announcement said the closing is planned for the third quarter.

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The companies’ plans follow a spate of similar announcements in recent weeks.

Earlier this month, BG Group said it will join Exco Resources in 50-50 development and operation of Exco’s Appalachian basin assets in Pennsylvanian and West Virginia.

The two companies also plan to pursue construction and expansion of gathering systems, pipelines, and treating and processing facilities through a newly formed and jointly owned midstream company (OGJ Online, May 10, 2010).

In April, Kinder Morgan Energy Partners announced plans to modify and expand the existing Cochin Pipeline system to accommodate NGL transportation from the Marcellus to fractionation plants and chemical markets near Sarnia, Ont., and Chicago.

KMEP will build 250 miles of pipeline from southern Pennsylvania to the Cochin interconnect at Riga, Mich. From Riga, the company anticipates product will travel through the existing Cochin system to Windsor, Ont., and then through the Windsor-Sarnia Pipeline to Sarnia.

KMEP also plans to reverse the eastern leg of its Cochin line to move NGL from Riga to Chicago, where it expects to build an additional pipeline to connect to existing fractionation and chemical plants.

Also in April, Dominion revealed plans to expand gas gathering, processing, and transportation for growing volumes of high-btu gas being produced in the Marcellus shale areas of Marshall and Wetzel counties, W.Va., and surrounding counties in West Virginia, Pennsylvania, and Ohio.

In cooperation with Exterran Holdings Inc., Houston, Dominion will deliver residue gas from two gas plants Exterran will build and operate in Ohio and West Virginia (OGJ Online, Apr. 20, 2010).

In March, Enbridge announced plans to develop an NGL pipeline from the Marcellus to the US Midwest. The line would deliver into the existing NGL system in the Chicago area, including the Aux Sable plant (OGJ Online, Mar. 24, 2010).

Contact Warren R. True at warrent@ogjonline.com.


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