NiSource Gas Transmission and Storage’s Midstream & Minerals Group LLC and its various subsidiaries announced they have entered into definitive agreements with affiliates of Hilcorp Energy Co. to develop new pipeline infrastructure and natural gas liquids (NGL) processing facilities on in the Utica Shale region of northeast Ohio and western Pennsylvania. The first phase of the venture’s investment program, amounting to approximately $300 million, is planned for later this year.
As part of the agreement, NiSource will participate in a separate joint venture with Hilcorp to develop the hydrocarbon potential on a significant combined acreage block in the Utica/Point Pleasant Shale formation in northeast Ohio and western Pennsylvania. NiSource will be a non-operating working interest owner in the total acreage position. Hilcorp will serve as operator and will manage the development.
“This joint venture, involving one of America’s most respected and successful independent energy production firms, leverages NiSource’s extensive asset base and operating experience in the Utica Shale region to create near-term value, as well as long-term sustainable growth for our customers and shareholders,” NiSource President and CEO Robert C. Skaggs, Jr. said. “This is a tangible example of the various upstream and midstream growth options available to NiSource across the shale energy region. We will continue to build our inventory of growth and investment projects as development and delineation of the shale play unfolds.”
The joint venture, named Pennant Midstream, LLC, will invest in the construction of 50 miles of 20-inch gathering pipeline facilities in northeast Ohio and western Pennsylvania along with the construction and installation of a cryogenic NGL processing plant in Ohio.
NiSource Midstream Services, LLC, will operate the system, which is expected to initially provide approximately 400 Mmcf per day of both wet and dry gas gathering—expansion is expected in the future.
The Hilcorp/NiSource upstream joint venture will lead the project with a long-term gathering and processing agreement, while additional capacity will be marketed to other active producers in the area.
The project is expected to be in service by the third quarter of 2013.
“This project reinforces our leadership position in the Utica and our ability to quickly respond to the critical needs of our producer customers,” Jimmy D. Staton, executive vice president and NiSource Gas Transmission & Storage group CEO, said. “We continue to evaluate a variety of options focused on leveraging our additional acreage holdings and asset position in the Utica Shale, and we expect the timing of future projects to correspond generally to the producer activity in those areas.”
Hilcorp Chairman and CEO Jeff Hildebrand said in a prepared statement that the company is “pleased to partner with NiSource to develop gathering and processing options for producers early in the Utica Shale wet gas horizon.”