Barnett Shale lease area
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Next month's opening of a 140-mile pipeline from near Haslet in northwest Tarrant County to Paris in Northeast Texas can be likened to opening a multilane interstate around a growing suburb.
The $155 million pipeline, being built by Crosstex Energy Services, will loop around the north side of Denton and the Dallas-Fort Worth area. Some of the gas will be siphoned to Atmos Energy and other users in the Metroplex. The remainder will flow into interstate pipelines near Paris for shipment to markets in the eastern US.
For the first time, the 90-plus exploration and development companies plying the Barnett Shale will be directly connected to the country's largest consumer markets.
"Until very recently, the only pipeline outlet for Barnett Shale gas was the old TXU pipeline that ran eastward to serve Dallas," said Barry Davis, the Texas Christian University business college graduate who helped found Dallas-based Crosstex a decade ago and is its president.
For all the hype about production in the Barnett Shale, which has doubled since 2002 and totaled 455 billion cubic feet last year, the crucial infrastructure to get the gas to market has come slower.
Much of the Barnett Shale production has been shut in completed wells because of a lack of pipeline outlets.
So the 375 million cubic feet of transport capacity is a needed improvement to aid development of the field and to get the gas to market quickly.
Because the number of drilling rigs in the Barnett Shale more than doubled by the end of 2005 to an average of 140 and is likely to increase this year, new production is likely to increase in 2006. Sometime this year, the Barnett Shale will yield its 2 trillionth cubic foot of gas since the field was opened in the late 1990s.
Add the Crosstex line to a new pipeline that Energy Transfer Partners of Dallas opened last year from Cleburne to a processing plant at Springtown, and another running east from Cleburne to Carthage in East Texas, and the Barnett Shale field will be looped by pipeline infrastructure by the end of this year.
The current configuration, where Barnett Shale gas would have to be piped to Katy, near Houston, to get to East Coast markets, would soon be inadequate for the huge volumes of gas coming out of the Barnett Shale. Also, producers and pipeline people are aware that beginning later this decade, the Gulf Coast will begin receiving liquefied natural gas from foreign sources. The LNG will be added to a pipeline infrastructure along the Gulf that also receives the natural gas produced from offshore rigs.
"There will be a very tight pipeline situation along the Gulf when LNG begins happening," Davis said.
Since October, Crosstex's contractors have been laying pipe in 80-foot sections at least 3 1/2 feet below ground. The biggest logistical challenge was the crossing 40 feet under the Trinity River northeast of Denton, which required a 40-foot deep tunnel extending almost 3,000 feet.
During the final days before the pipeline is turned on, the system is tested by running "pigs," or barrellike devices filled with telemetry sensors, that move through the pipeline to look for any kinks or cracks.
"The pig can see anything inside the pipe," says El Pelky, a field technician for Enduro Pipeline Services of Tulsa as his crew readied a test last week near Celina.
The principal supplier of natural gas for Crosstex will be Chief Oil & Gas, the Dallas-based operator that last year produced 38 billion cubic feet of gas and whose processing plant near Haslet will be the western terminus of the Crosstex line. Chief has put itself up for sale, which Davis views calmly.
"The buyer for Chief will need pipeline access just like anybody else," Davis said. "And we anticipate that the new owner will, in all likelihood, increase production from Chief leases. So we'll probably get more volumes."
So confident is Crosstex in the power of the Barnett Shale that it is already planning a 36-mile expansion of the pipeline extending south from Haslet along the Tarrant/Parker county line to Johnson County.
"The lines into the Springtown processing plant are full, so there is a need for more capacity west of Fort Worth," Davis said.
The new lines by Crosstex and Energy Transfer Partners, welcome as they are, have renewed long-held suspicions between producers and pipeline operators over pipeline rates. Traditionally, pipeline rates have been confidential, which generates suspicion among producers that some get better deals than others.
The Texas Independent Producers and Royalty Owners Association has petitioned the Texas Railroad Commission to make all gas pipeline rates open for public inspection. The association said it is seeking relief from what it calls "monopolistic" practices by pipeline companies, adding "TIPRO is of the opinion that information transparency is necessary for the existence of a competitive environment."
Davis acknowledged the issue but said "there is competition among the pipeline companies. We have to knock on doors to get the business. What we're trying to do is help the producers, and I think most of them realize that."
Crosstex was born from a buyout by Davis and other executives of the old Comstock pipeline company in Dallas. Davis and his partners recognized that the deregulation of natural gas pipelines in the 1990s created a niche.
"Before deregulation, you had your local gathering lines from the producers and into the users, and the big interstate hubs," Davis said. "But deregulation created the need for a midlevel niche of pipelines that serve intrastate markets."
Until the construction of the new Barnett Shale line, Crosstex grew its system through acquisitions: 1,400 miles of pipeline in South Texas, 2,000 miles in Louisiana, and 600 miles in Mississippi.
"For a long time, expansion was always explained in terms of 'What have you bought lately?'" Davis said. "Now, everything is building new lines."
Copyright (c) 2006, Fort Worth Star-Telegram, Texas. Distributed by Knight Ridder/Tribune Business News.