A leading master limited partnership, Williams Partners L.P. (WPZ) and Royal Dutch Shell plc (RDS.A) have agreed to begin a new midstream joint venture (:JV), with an aim of supplying gas gathering and gas processing services for production in Northwest Pennsylvania.
Three Rivers Midstream – the new venture – has inked a long-term fee-based dedicated gathering and processing agreement with Royal Dutch Shell. Per the contract, the new venture will serve the company’s production in the area, which includes a committed acreage of about 275,000. The JV intends to track down other producers in the liquids-rich areas of Northeast Ohio in addition to Northwest Pennsylvania for gathering and processing services.
The site for the construction of a 200 million cubic feet per day cryogenic gas processing plant and related facilities is expected to be fixed at a future date by Three Rivers Midstream. The initial plant is anticipated to come online by second quarter 2015. The large-scale gas processing complex will have expandable options with the growing business of Three Rivers'.
The complex is likely to be linked to two key future developments in Pennsylvania. The first is, Royal Dutch Shell’s planned ethylene cracker (feasibility still being studied) in Beaver County, the viability of which is still under analysis. The second is, Williams’ Boardwalk joint venture to build the Bluegrass Pipeline system for supplying liquids to the fast growing Gulf Coast and export markets from the Marcellus and Utica. The proposed Bluegrass pipeline is expected to be commissioned by the end of 2015.
Initially, Williams’ will operate the Three Rivers Midstream with a significant share in the assets. Royal Dutch Shell will hold a right to increase its ownership by investing capital before mid-2015. Williams’ is expected to invest about $150 million in the venture initially, excluding the expenditure for the gathering system.
The new venture facilitates the partnership to proceed with its strategy of building large-scale infrastructure solutions to offer producers of the liquid-rich areas access to the best markets for their yield.
Williams holds a Zacks Rank #3 (short-term Hold rating). However, Zacks Ranked #1 Range Resources Corporation (RRC) and Stone Energy Corp (SGY) are expected to outperform the market over the next few months.
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