Enterprise announced an expansion of its network of crude oil and natural gas assets in South Texas as part of a letter of intent (LOI) signed with a major Eagle Ford Shale producer. According to the LOI, Enterprise would construct a 140-mile crude oil pipeline originating in Karnes County, Texas and connecting to the partnership's existing crude oil system in Austin County, Texas supported by a long-term transportation agreement. Enterprise is in discussions with a number of other producers to provide crude oil transportation services through additional connections to the pipeline. When completed, Enterprise's crude oil pipeline system will provide access to the refining markets in the Houston area, as well as the major storage hub in Cushing, Oklahoma through the Enterprise-operated Seaway pipeline.
The capacity of the new crude oil pipeline will be sized to serve multiple producers as output in the Eagle Ford Shale region continues to increase. In addition to the pipeline infrastructure, the partnership is also constructing central delivery points in three locations along the new pipeline to receive crude oil from gathering lines and trucks. Two of the delivery points will be located in Karnes County, Texas, while the third will be built in Gonzales County, Texas. This crude oil pipeline expansion project is expected to be completed in the fourth quarter of 2011.
"We are pleased to announce the execution of this letter of intent to provide crude oil transportation services in the Eagle Ford Shale,"said Michael A. Creel, Enterprise's president and chief executive officer. "Our existing crude oil system, which we acquired in the TEPPCO acquisition in 2009, enables us to quickly and cost efficiently expand the system to serve producers in the Eagle Ford. This project provides Enterprise an opportunity to diversify our operations while taking advantage of the complementary nature among our crude oil, natural gas and natural gas liquids (NGL) businesses. Our ability to utilize the partnership's vast South Texas infrastructure network as a foundation to pursue incremental projects should enable the partnership to earn attractive returns on capital by generating incremental cash flow while limiting our capital costs."
The LOI also contains a natural gas component, which includes a seven-year natural gas transportation and processing agreement. Enterprise is developing significant additions to its natural gas gathering, processing and storage system and its NGL transportation and fractionation network serving South Texas producers. In addition to the recently announced initiatives to increase NGL fractionation capacity at the partnership's Mont Belvieu, Shoup, and Armstrong facilities, expansion plans are expected to include additional natural gas processing and NGL pipeline infrastructure.
Activity in the Eagle Ford Shale continues to exceed industry expectations as the approximately 50 rigs working in the play have drilled more than 130 wells. Current production from the play is estimated at approximately 190 million cubic feet per day of natural gas and 10,000 barrels per day of crude oil. In addition to the LOI, Enterprise is in various stages of negotiations with other producers to provide midstream services.
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