Koch Pipeline, Arrowhead Pipeline add to South Texas crude capacity

Koch Pipeline Company LP and Arrowhead Pipeline LP will move more Eagle Ford crude via the Arrowhead pipeline to Corpus Christi following a recent agreement and joint tariff.

"This agreement with Arrowhead is one of several projects to expand the joint capabilities of our pipelines in South Texas," said Kim Penner, president of Koch Pipeline. "The Arrowhead lines primarily serve the western Eagle Ford production area of Frio, LaSalle, McMullen, and Live Oak counties. The initial expansion phase is currently underway and will add capacity throughout 2011 of more than 50,000 barrels of crude and condensate per day."

"This is the first in a series of expansions. Together we offer a solution to transport current production and the future growth in the Eagle Ford," said Steve Jacobs, president of Arrowhead Pipeline and Harvest Pipeline Company. "The ability to help producers get their oil to market is critical."

"Expansion will include extending our mainline to producers, additional pump stations, truck unloading facilities and crude storage," Jacobs said. "Ultimately we will install new mainlines to transport the increased production."

"We believe Corpus Christi is the most cost-effective market to clear Eagle Ford crude and condensate production," Penner said. "Arrowhead and Koch Pipeline continue to develop options for adding even more capacity to accommodate growing domestic production.

"We are also in the process of building a new line to expand delivery capability to Flint Hills Resources' Ingleside waterborne terminal and actively reviewing a new build extension into Karnes County," Penner said.

The northern leg of the Arrowhead system runs through the Eagle Ford trend from Maverick County to San Patricio County. Arrowhead owns an extensive system of oil and gas gathering and mainline systems across South Texas and Louisiana. Harvest Pipeline Company is the operator of the Arrowhead systems.

Koch Pipeline is the largest pipeline transporter of South Texas crude and operates about 540 miles of active crude oil transportation lines in Texas. The company has relationships with other crude distribution systems that further its ability to provide services in this growing production area.

TexStar Midstream Services LP is rapidly expanding its 125-mile low-pressure gathering system in Frio and LaSalle Counties in South Texas in order to handle future expected Eagle Ford and Buda gas volumes. Treating capacity is being increased, and the sour gas capacity will be over 30 MMcfd by the end of the first quarter 2011.

In addition, more than 40 miles of gathering lines are currently being planned that will be in place by December. TexStar will be installing over 2,000 horsepower in additional compression to the current 1,400 hp. TexStar is routing a gas export line to the Three Rivers area. This will access multiple pipelines with gas processing capabilities and new gas markets. This pipeline will also provide access for producers in Atascosa and McMullen Counties, south and southwest of San Antonio.

Currently, TexStar is planning and acquiring rights of way for a major oil line extension from its dedicated acreage to the Three Rivers area. This expansion will allow for direct connects to end-user markets as well as shipping from the coast and into lines to the Houston area. The oil gathering system will allow for not only lower gravity sour Eagle Ford crude, but also high gravity Eagle Ford condensate. TexStar plans on having this line in service in the second quarter of 2011.

Eagle Ford Gathering LLC, a 50/50 joint venture between Kinder Morgan Energy Partners LP and Copano Energy LLC established to serve natural gas producers in South Texas, has inked a long-term gas services deal with Denver-based SM Energy (formerly St. Mary Land & Exploration Co.).

Under terms of the agreement, SM Energy will commit up to 200,000 MMbtu per day of Eagle Ford Shale natural gas production over a 10-year term from LaSalle, Dimmit, and Webb counties. Eagle Ford Gathering will provide gathering, transportation, and processing services and will construct approximately 85 miles of 24-inch and 30-inch pipeline from SM Energy's acreage in the western Eagle Ford Shale play to Kinder Morgan's Freer compressor station in Duval County. The pipeline is expected to begin service in the summer of 2011.

Kinder Morgan and Copano will invest about $137 million in phase one of the project and have each committed 375,000 MMbtu of capacity to Eagle Ford Gathering for transportation on Kinder Morgan's intrastate pipeline from Laredo to Katy and for processing at Copano's Houston Central processing plant. Copano serves as operator and managing member of Eagle Ford Gathering.

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