Enterprise says Appalachia-to-Texas pipeline is a go

A pipeline project that could eventually transport up to 190,000 barrels of ethane daily from Appalachian shale fields to the Texas Gulf Coast has secured enough customers to move forward, Enterprise Products Partners announced Tuesday.

The Houston company, which revealed two months ago that it had lined up its first long-term contract to use the pipeline, now says it has enough in place to make the project financially feasible. The 1,230-mile line is expected to begin pumping in early 2014, taking advantage of increased production of natural gas liquids and their lower price relative to oil-based alternatives.

"The willingness of shippers to commit to a term of at least 15 years reflects the long-term potential of shale development in the Appalachian region and provides us with the assurance necessary to build the midstream infrastructure that will facilitate further development of this important domestic resource," Enterprise president and CEO Michael Creel said in a statement.

In November, Enterprise announced it had signed up Oklahoma City-based Chesapeake Energy Corp. for the pipeline. A company spokesman on Tuesday declined to identify any of the newly signed customers or detail how much ethane they committed to purchase.

However, energy analyst Darren Horowitz of Raymond James & Associates said it appears the project will begin operations with four to six customers committed to a combined capacity of 75,000 barrels a day.

At that rate, he said, Enterprise could realize a 10 to 12 percent return on a project he estimated to cost $1.2 billion to $1.3 billion. The company didn't disclose the cost.

Should industry demand continue to grow as forecast into 2013, Enterprise could see additional return, Horowitz said.

In recent years, the Marcellus and Utica shale plays in Pennsylvania, Ohio and West Virginia have become a major hub for production of natural gas liquids. One of these, ethane, a liquid form of natural gas, is feedstock for ethelyne, which in turn is a base material for many plastic products.

Horowitz said demand for ethane reached 1 million barrels a day in December, one of the highest rates in a decade.

To complete the Appalachia-to-Texas project, Enterprise plans to build 595 miles of pipeline from Washington County, Pa., to Cape Girardeau, Mo., then connect to an existing 580-mile pipeline to Beaumont.

The latter is one of two parallel pipelines that move refined products from Beaumont northward, but Enterprise spokesman Rick Rainey said the other, larger line is sufficient to meet demand.

Enterprise also plans to build a 55-mile connector pipeline to Mont Belvieu, where it has a storage complex, and other lines to petrochemical plants along the Gulf Coast.

Rainey said the project is expected to generate about 4,000 construction jobs and broader economic benefits for the petrochemical and pipeline industries and the communities that depend on them.

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