Tenaska Capital Management plans gathering system to serve Haynesville


Published: Oct 8, 2009
TCM's midstream expansion plans coincide with a general uptick in natural gas prices

Tenaska Capital Management LLC (TCM), an affiliate of Tenaska Energy Inc., plans to build a new natural gas gathering system with multi-market capability to serve the Haynesville shale formation in areas of East Texas lacking in gathering infrastructure.

TCM, manager of the $2.4 billion TPF II LP, a private equity fund, says the 140-mile gathering system will have an initial capacity of 500 million cubic feet (MMcf) per day, with an ultimate capacity of 800 MMcf per day achievable with the addition of compression.

Back in August, TCM senior managing director Daniel E. Lonergan told OGFJ Associate Editor Mikaila Adams that the company recognized natural gas as a "linchpin fuel" and, as a result, the company expanded and diversified its investment in the US midstream natural gas sector by establishing a joint venture to be operated as Frontier Gas Services LLC. "The diversification between the gas storage effort and this effort allows us to deploy a broader more capital into this promising sector," he continued.

At that time, Lonergan believed a lot of shale drilling activity would be supported by gas prices once they reached a certain level. "There's a consensus view out there I'd say of $5 to $7 [gas prices], and that will support a lot of shale drilling activity." TCM CEO and senior managing director Paul Smith agrees. He believes the gas will be profitable for producers even in the current gas price environment.

With natural gas prices up, and as of this writing flirting around $5, the timing of TCM's newest venture seems on target.

The gathering system will traverse Nacogdoches, San Augustine, Shelby and Panola Counties, providing greater takeaway capacity and market flexibility. A TCM affiliate is in the process of acquiring right-of-way.

“Development of this gathering system is a reflection of the confidence TCM has placed in the potential for the Haynesville shale formation,” said Smith, who believes the formation has "the capacity to be one of the most productive of the deep shale formations in the US."

Mike Latchem, who is responsible for development of the project, said the gathering system will begin deliveries in early 2010 to multiple existing major local and interstate pipeline systems in Nacogdoches County.

The remainder of the pipeline connecting to multiple interstate and intrastate pipeline systems near Carthage, Texas, will be completed in the second quarter of 2010.

“Our development of this project has generated significant interest from producers, and we expect the pipeline to be fully subscribed by year end 2009,” said Latchem. “We will be providing the infrastructure required by our customers and unmatched flexibility to access the local and interstate markets in East Texas


Buck