The new Enterprise Sherman Extension is supported by long-term contracts with Devon Energy Corporation, the largest producer in the Barnett Shale area, and significant indications of interest from leading producers and gatherers in the basin, as well as shippers on Enterprise's Texas intrastate pipeline system.
At its terminus, the new pipeline system will make deliveries into Boardwalk Pipeline Partners L.P.'s Gulf Crossing Expansion Project, which will provide export capacity for Barnett Shale natural gas production to multiple delivery points in Louisiana, Mississippi and Alabama that offer access to attractive markets in the Northeast and Southeast United States. In addition, the Sherman Extension provides natural gas producers in East Texas and the Waha area of West Texas with access to these higher value markets through Enterprise's Texas intrastate pipeline system.
The Sherman Extension will be comprised of a 30 and 36-inch diameter pipeline originating at a central delivery point on Enterprise's Texas intrastate pipeline system near Morgan Mill, Texas (southwest of Fort Worth), and will extend through the center of the current Barnett Shale development area to Sherman, Texas. From there, it will connect with Boardwalk's 42-inch Gulf Crossing Expansion, which features interconnects with seven major interstate pipelines, including the Transcontinental Pipeline Company system that accesses markets in the Northeast. The Sherman Extension is estimated to cost approximately $400 million, most of which will be spent in 2008, and is expected to be placed into service in the fourth quarter of 2008. Furthermore, Enterprise has the option to acquire up to a 49 percent interest in the Gulf Crossing project, subject to certain conditions.
"With production expected to nearly double over the next six years, the Barnett Shale play represents one of the most prolific natural gas development areas in the country," said Enterprise President and CEO Robert G. Phillips. "Current pipeline capacity in the region is not sufficient to accommodate this growth, creating an outstanding opportunity for Enterprise to combine elements of its North Texas midstream infrastructure with the new Sherman Extension project to provide a comprehensive export solution for producers and gatherers from this region. Further, Enterprise views this project as an important expansion of our existing Texas intrastate system, providing Enterprise with the additional flexibility to transport growing volumes from the East Texas Bossier Trend and as far away as the Waha area of the Permian Basin to price-competitive markets in the eastern U.S."
Terrence Ruder, vice president and general manager of Devon Energy Corporation's Marketing & Midstream Division, stated, "The Enterprise and Boardwalk projects will provide a secure outlet to an expanding market area for Devon's growing natural gas production in the Texas Barnett Shale and Oklahoma Woodford Shale plays."
In addition to volumes received from producers and gatherers in the Barnett Shale region, the Sherman Extension will allow Enterprise to provide 200 million cubic feet per day (MMcf/d) of natural gas capacity from the Waha area in West Texas to Morgan Mill. The project will also make 400 MMcf/d of capacity from East Texas available on Enterprise's existing 36-inch intrastate pipeline. Moreover, the new project will provide greater downstream market access for both current and planned gathering systems located throughout the Barnett Shale development area. As part of its commitment to the project, Devon has subscribed for capacity on the new pipeline to accommodate a portion of the company's current and future Barnett Shale production and has extended existing firm transportation contracts on Enterprise's Texas intrastate pipeline system until 2015.
The Barnett Shale is considered to be one of the largest unconventional resource plays in North America, covering approximately 14 counties and over 7 million acres in the Fort Worth basin of North Texas. Current natural gas production is estimated at 2 Bcf/d from approximately 5,500 wells. Approximately 130 rigs are currently estimated to be working to develop Barnett Shale acreage in the region. According to the United States Geological Survey, "the Barnett Shale play has total resource potential of approximately 26 trillion cubic feet of natural gas."
Enterprise Products Partners L.P. is one of the largest publicly traded energy partnerships with an enterprise value of approximately $17 billion, and is a North American provider of midstream energy services to producers and consumers of natural gas, NGLs and crude oil. Enterprise transports natural gas, NGLs and crude oil through more than 34,000 miles of onshore and offshore pipelines. Services include natural gas transportation, gathering, processing and storage; NGL fractionation (or separation), transportation, storage, and import and export terminaling; crude oil transportation and offshore production platform services.
Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration, production and property acquisitions.
Boardwalk Pipeline Partners, LP is a master limited partnership engaged through its subsidiaries, Texas Gas Transmission, LLC and Gulf South Pipeline Company, LP, in the interstate transportation and storage of natural gas. Boardwalk's two interstate natural gas pipeline systems have approximately 13,470 miles of pipeline and underground storage fields with aggregate working gas capacity of approximately 146 Bcf.
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