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Kinder Morgan, MarkWest Utica EMG Announce Plans To Form Joint Venture To Support Northern Ohio Rich-Gas Development And NGL Takeaway From The Utica And Marcellus Shale Resource Plays

Kinder Morgan Energy Partners, L.P. (NYSE: KMP) (Kinder Morgan), and MarkWest Utica EMG, L.L.C. (MarkWest Utica EMG), a joint venture between MarkWest Energy Partners, L.P. (NYSE: MWE) (MarkWest) and The Energy and Minerals Group (EMG) today announced they have signed a letter of intent to form a midstream joint venture (JV) to pursue two critical new projects to support producers in the Utica and Marcellus shales in Ohio, Pennsylvania and West Virginia. The first project consists of the development of a 400 million-cubic-foot-per-day (MMcf/d) cryogenic processing complex in Tuscarawas County, Ohio, utilizing an existing, 220-acre site that Kinder Morgan has under option. The second project consists of the development of an initial, 200,000 barrels-per-day (bpd), C2+ natural gas liquids (NGL) pipeline that originates at the planned JV processing facilities in Ohio and transports NGLs to Gulf Coast fractionation facilities.

Key elements of the processing complex project include:

  • MarkWest Utica EMG would anchor the JV’s first of two planned 200 MMcf/d cryogenic processing plants to be constructed on Kinder Morgan’s existing 220-acre site in Tuscarawas County, Ohio (JV processing complex). The JV would expect the initial 200 MMcf/d cryogenic processing plant to be in service by the fourth quarter of 2014 with the second 200 MMcf/d plant in-service shortly thereafter, subject to timing of customer commitments. The existing 220-acre site is expandable and could accommodate more than 1 billion cubic feet per day of processing capacity;
  • MarkWest Utica EMG would deliver rich-gas volumes to the JV processing complex through an extension of its existing rich-gas gathering system in Harrison, Belmont, Guernsey, Noble and Monroe counties in Ohio. The JV processing complex would provide MarkWest Utica EMG’s producer customers with additional residue outlets into the Tennessee Gas Pipeline and Dominion Transmission pipeline systems;
  • The JV processing complex would serve new customers in Carroll, Columbiana, Mahoning and Trumbull counties in northern Ohio and provide a critical full-service solution, which includes gas processing, NGL transportation and fractionation and residue gas outlets;
  • To deliver the northern Utica gas to the processing complex, Kinder Morgan has obtained regulatory approval to convert a portion of an existing 26-inch Tennessee Gas Pipeline Company, L.L.C. pipeline into rich-gas gathering service, which could begin receiving rich-gas by the fourth quarter of 2014;
  • The JV would construct a new pipeline to deliver NGLs produced at the JV processing complex into MarkWest and MarkWest Utica EMG’s extensive NGL gathering network for short-term and long-term fractionation at its Ohio and Pennsylvania fractionation and marketing complexes;
  • The JV would own the processing complex on a 50-50 basis and MarkWest Utica EMG would operate the facilities;

Key elements of the NGL pipeline project include:

  • Kinder Morgan and MarkWest Utica EMG will develop a NGL pipeline project from the tailgate of the JV processing complex to Gulf Coast fractionation facilities through the conversion of over 900 miles of Kinder Morgan’s 24-inch and 26-inch Tennessee Gas Pipeline system currently in natural gas service from Tuscarawas County, Ohio to Natchitoches, La., and the construction of approximately 200 miles of new NGL pipeline from Natchitoches to Mont Belvieu, Tex., and/or south Louisiana. Kinder Morgan and MarkWest Utica EMG are evaluating constructing new fractionation facilities, as well as utilizing third-party fractionation facilities throughout the Gulf Coast;
  • The proposed NGL pipeline would access MarkWest and MarkWest Utica EMG’s extensive NGL pipeline network that extends throughout the rich-gas areas of the Marcellus and southern Utica to deliver NGLs to the new NGL pipeline;
  • By converting over 900 miles of existing Tennessee Gas Pipeline assets and utilizing MarkWest and MarkWest Utica EMG’s existing NGL network, the JV parties believe their NGL pipeline is best positioned to provide the most cost effective Y-grade outlet from the Utica and Marcellus shale plays to the Gulf Coast area markets;
  • The NGL pipeline would be expandable to 400,000 bpd with the addition of pump stations;
  • Subject to sufficient shipper commitments, permitting and all related regulatory approvals, a fourth quarter 2015 in-service date for the NGL pipeline is anticipated.
  • Kinder Morgan would own at least 75 percent of the NGL pipeline and MarkWest Utica EMG would have the option to invest up to 25 percent. Kinder Morgan would operate the pipeline.

“We are pleased to announce this exciting joint venture with MarkWest in the Utica and Marcellus shale resource plays,” said Kinder Morgan Chairman and CEO Richard D. Kinder. “The combination of Kinder Morgan’s strategically located and existing pipeline assets that traverse through the heart of the Utica and Marcellus shale plays, along with MarkWest’s existing and significant midstream footprint throughout the Utica and Marcellus shale plays, should provide significant growth opportunities for the JV.”

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