Chesapeake announces pipeline agreement

Published 3:08 pm Friday, October 3, 2008

Chesapeake Energy Corp. entered a 10-year agreement to transport 375 million cubic feet of natural gas from its growing operations in Arkansas to a distribution terminal in Mississippi through a new 187-mile pipeline system, the company announced Wednesday.

The Oklahoma City-based company said the 42-inch Fayetteville Express Pipeline will be constructed by Kinder Morgan Energy Partners, L.P. and Energy Transfer Partners, L.P.

The pipeline system will originate in Conway County, Ark., and transport gas from Chesapeake’s growing Fayetteville Shale play to an interconnect with Trunkline Gas Company in Quitman County, Miss.

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The agreement includes an option to transport an additional 125 mmcf per day on the pipeline.

Pending regulatory approval, Chesapeake expects the pipeline project to begin service by late 2010 or early 2011.

“We are pleased to announce that we have secured substantial new takeaway capacity for our Fayetteville Shale production that will provide Chesapeake and our 25 percent partner, BP America, with improved access to more favorable natural gas markets at an attractive transportation rate,” Chesapeake Chief Executive Officer Aubrey McClendon said in a statement.

McClendon said the agreement will reduce pricing volatility and accommodate the substantial growth the company expects in the years ahead from its Fayetteville Shale play.

The Fayetteville Shale play, which extends across several counties in central and eastern Arkansas, is one of several unconventional gas reservoirs across the country that have been targeted in recent years for development due to improved drilling technologies and rising natural gas prices, said Ralph Davis, chair of the Geology Department at the University of Arkansas.

“The Fayetteville Shale play is a fairly sizable region, and there’s a lot of significant operations in the area,” Davis said. “It’s an economic boom right now for Arkansas — it’s one of the primary economic drivers in the state.”

Chesapeake also announced Wednesday it will hold its 2008 investor and analyst meeting Oct. 15-16 at its corporate headquarters in Oklahoma City.