Kinder Morgan Energy Partners L.P. has teamed up with MarkWest Utica EMG L.L.C – a joint venture (JV) between MarkWest Energy Partners, L.P. (MWE - Analyst Report) and The Energy and Minerals Group ("EMG") – to form a midstream JV to pursue two new projects.
The two parties have signed a letter of intent to support oil and gas producers in the Utica and Marcellus shales in Ohio, Pennsylvania and West Virginia.
The first project will utilize an existing, 220-acre site that Kinder Morgan has under option and will include the development of a 400 million-cubic-foot-per-day (MMcf/d) cryogenic processing complex in Tuscarawas County, Ohio. It is a 50:50 JV, with MarkWest Utica EMG being the operator. The existing 220-acre site is expandable and can accommodate over 1 billion cubic feet per day of processing capacity.
The JV’s first of two planned 200 MMcf/d cryogenic processing plants, to be commissioned by the fourth quarter of 2014, would be anchored by MarkWest Utica EMG. The second 200 MMcf/d plant will be brought online shortly thereafter, subject to the timing of customer commitments.
The project would provide rich-gas volumes to the JV processing complex through the extension of its existing rich-gas gathering system in Harrison, Belmont, Guernsey, Noble and Monroe counties in Ohio. The JV processing complex would supply new customers in Carroll, Columbiana, Mahoning and Trumbull counties in northern Ohio and offer a critical full-service solution.
A new pipeline is likely to be constructed by the JV to transfer 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 second project comprises the development of an initial, 200,000 barrels-per-day (bpd), C2+ natural gas liquids (NGL) pipeline that begins at the planned JV processing facilities in Ohio and carries NGLs to Gulf Coast fractionation facilities.
The pipeline would be build through the conversion of over 900 miles of Kinder Morgan’s 24-inch and 26-inch Tennessee Gas Pipeline systems currently in natural gas service from Tuscarawas County, Ohio to Natchitoches and the construction of about 200 miles of new NGL pipeline from Natchitoches to Mont Belvieu and/or south Louisiana.
Both the parties are also appraising constructing new fractionation facilities, as well as utilizing third-party fractionation facilities throughout the Gulf Coast.
The NGL pipeline, scheduled to commence operations in 2015, would be expandable to 400,000 bpd with the addition of pump stations. Kinder Morgan, the operator, will hold 75% of the NGL pipeline while MarkWest Utica EMG would have the option to invest up to 25%.
Kinder Morgan carries a Zacks Rank #3 (Hold). However, there are other stocks in the oil and gas sector – Cabot Oil & Gas Corp. (COG - Analyst Report) and Dril-Quip, Inc. (DRQ - Analyst Report) – which hold a Zacks Rank #1 (Strong Buy) and are good investment options.