DCP Midstream LLC announced Jan. 19 it has signed long-term gas gathering and processing agreements with Pioneer Natural Resources USA Inc. , Reliance Eagleford Upstream Holding LP and Newpek LLC (collectively, the Pioneer JV), under which DCP Midstream will provide a full scope of midstream energy services to handle liquid-rich natural gas from the Pioneer JV’s acreage in the Eagle Ford shale play in south central Texas.
The agreement covers the gathering, processing, fractionation and marketing services of raw natural gas and gas liquids by DCP Midstream for the Pioneer JV’s Eagle Ford shale production from more than 300,000 gross acres. In addition to the Pioneer JV acreage, DCP Midstream has also executed a long-term gathering and processing agreement with a privately held producer for 33,000 acres of Eagle Ford development in Wilson and Karnes counties.
DCP Midstream will construct approximately 130 miles of 16-, 20- and 24-inch gathering pipelines that will connect the Pioneer JV’s and the privately held producer’s central gathering points in south central Texas and other gas supply to DCP Midstream’s existing area gathering and processing facilities. DCP Midstream has excess processing capacity of 250 million cubic feet per day (mmcf/d) currently available in the Eagle Ford shale area.
In addition, DCP Midstream is announcing plans to construct a sixth plant of 200 mmcf/d capacity and related natural gas liquids infrastructure, which is expected to be online in third quarter 2012, increasing DCP Midstream’s total capacity in the area to 1 billion cubic feet per day (bcf/d). DCP Midstream has purchased the land and plant equipment and has received regulatory permitting from the state of Texas to begin construction.
This agreement follows DCP Midstream’s recent announcement of the Trunkline Gas pipeline transaction, in which DCP Midstream will be the anchor shipper on Trunkline Gas’ 20-inch, South Texas pipeline system. DCP Midstream is in the process of constructing large diameter pipelines in the Eagle Ford shale area to gather gas supply commitments. This will integrate DCP Midstream’s South and central Texas area gathering systems with Trunkline Gas’ 165-mile South Texas system to create a “super system” in South Texas. This super system will plumb together DCP Midstream’s five existing processing facilities with the new Eagle gas plant to create a system with more than 1 bcf/d of processing capacity and associated fractionation capacity. DCP Midstream has executed long-term contracts with the Pioneer JV, ConocoPhillips, Petrohawk Energy, Enduring Resources, Murphy Oil, Riley Exploration and others for gas production from more than 450,000 acres in the Eagle Ford shale area.
“We are very excited to work with the Pioneer JV to provide a full slate of midstream services,” said Tom O’Connor, chairman, president and CEO of DCP Midstream. “DCP Midstream is executing on its strategy of leveraging existing area assets and integrating them to be able to provide speed-to-the-ball service for early Eagle Ford shale development, and has aggressively secured long-term gas supply commitments that support expansion plans – all of which provide economies of scale and critical mass in DCP Midstream’s service footprint. This strategy is similar to DCP Midstream’s approach in other liquids rich areas, such as the DJ/Niobrara, Wolfberry, Granite Wash and Avalon shale plays.”