Williams (NYSE: WMB) and Boardwalk Pipeline Partners LP (NYSE: BWP) have executed a letter of intent to form a joint venture that would develop a pipeline project to transport natural gas liquids from the infrastructure-constrained Marcellus and Utica shale plays to the rapidly expanding petrochemical and export complex on the U.S. Gulf Coast, as well as the developing petrochemical market in the Northeast U.S.
The proposed Bluegrass Pipeline design would provide producers with 200,000 barrels per day of mixed NGLs take-away capacity in Ohio, West Virginia and Pennsylvania. The proposed pipeline could be increased to 400,000 barrels per day to meet market demand, primarily by adding additional liquids pumping capacity. It would deliver mixed NGLs from these producing areas to proposed new fractionation and storage facilities, which would have connectivity to petrochemical facilities and product pipelines along the coasts of Louisiana and Texas. Williams and Boardwalk are also exploring development of a new export liquefied petroleum gas terminal and related facilities on the Gulf Coast to provide customers access to international markets.
As proposed, the Bluegrass Pipeline would include the following:
By combining new construction with an existing pipeline, Williams and Boardwalk believe that the Bluegrass Pipeline can be placed into service and begin serving customers sooner than other options. Williams and Boardwalk are engaged in comprehensive project development planning including project design, cost estimating, economic and risk analysis, customer contracting, permitting and other legal and regulatory approvals and right-of-way acquisition. Williams and Boardwalk expect to sanction the project this year and place the planned project into service in the second half of 2015 assuming all necessary conditions are met.
“Given current market dynamics in the Northeast, existing liquids systems and local outlets will be overwhelmed by 2016. Total NGL volumes in the Northeast are expected to exceed 1.2 million barrels per day by 2020. The proposed Bluegrass Pipeline joint venture would support Williams’ midstream assets in the region, offer an attractive return and enable Williams to become the premier NGL infrastructure provider by economically linking the Utica and Marcellus region to petrochemical complexes on the U.S. Gulf,” said Alan Armstrong, president and chief executive officer of Williams.
Sanctioning and completion of this project is subject to, among other conditions, negotiation and execution of definitive joint venture and related agreements; execution of customer contracts sufficient to support the project; and the parties’ receipt of all necessary approvals, including board approvals and regulatory approvals, such as antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act, approvals by the Federal Energy Regulatory Commission (FERC), among others. Before Texas Gas Transmission may begin converting the TGT Loop Line, it must receive abandonment authority from FERC. Boardwalk plans to file the abandonment application with FERC by May 1, 2013 and the abandonment process is estimated to take between nine and 12 months.
Williams is based in Tulsa, Okla. Boardwalk's headquarters are in Houston
Genesis intends to finance the projects with funds available under its committed revolving credit facility.
The Southwest Louisiana Supply Project is designed to provide transportation to the growing southwest Louisiana market.