Williams and Boardwalk to Develop Natural Gas Liquids Line

Williams Cos. and Boardwalk Pipeline Partners LP agreed to develop a pipeline to carry natural gas liquids from booming shale formations in the U.S. Northeast to customers on the Gulf Coast.

The proposed 200,000 barrel-a-day pipeline would run from West Virginia to Kentucky where it would connect to Boardwalk’s existing Texas Gas Transmission system to Louisiana, the companies said in a joint statement today. The pipeline may be in service in the second half of 2015 and may be expanded to carry 400,000 barrels a day. The companies didn’t disclose costs.

Pipeline companies are building infrastructure to move gas and natural gas liquids, including ethane and propane, out of the Marcellus and Utica shale formations. Dow Chemical Co. and other petrochemical companies have proposed new plants on the Gulf Coast to take advantage of added supplies of natural gas liquids.

“The current infrastructure challenge with natural gas liquids in the Northeast is slowing drilling and isolating liquids supplies from the robust markets in the Gulf that are poised to grow substantially over the next five years,” Alan Armstrong, chairman and chief executive officer of Tulsa, Oklahoma-based Williams, said in the statement.

Boardwalk Diversifying

As part of this project, Boardwalk will convert a section of its Texas Gas line to liquids. Houston-based Boardwalk, which is 55 percent owned by Loews Corp., has been seeking to increase processing and transportation of gas liquids, which are produced alongside gas and have traded at higher prices.

Converting the 600-mile (1,000 kilometer) section of Texas Gas will save $1.2 billion to $1.8 billion compared with the cost of building a new pipeline, Boardwalk CEO Stan Horton said in an interview. Williams was exploring plans to build a new pipeline when it agreed to work with Boardwalk, Horton said.

“It became evident the right thing to do was to combine these projects,” he said. Final decisions on the capacity and fees will be made by the end of the year, he said.

Texas Gas, portions of which are 65 years old, was built to carry the fuel from Texas and Louisiana to Ohio, where it connected to utilities and other long-haul pipelines. In the past five years, output from the Marcellus and Utica shale in Pennsylvania and Ohio have reduced the need to ship gas to the U.S. Northeast.

Average daily throughput on the Texas Gas system fell 22 percent last year to 2.5 billion cubic feet, according to company filings.

Right ‘Step’

Enterprise Products Partners LP, the second-biggest U.S. pipeline operator, is reversing a pipeline between Cape Girardeau, Missouri, and Mont Belvieu, Texas, to carry ethane from the Marcellus to chemical plants near Houston.

Williams rose 1 percent to close at $33.72 in New York. Boardwalk increased 0.3 percent to $26.71.

The project may boost revenue at Boardwalk, which has lagged other pipeline companies in moving to liquids transportation, said Bernard Colson, an analyst with Global Hunter Securities LLC in Kansas City, Missouri.

As of yesterday, Boardwalk had fallen 3.7 percent in the past year, compared with a 6.7 percent gain for the Alerian MLP index, which tracks 50 pipeline companies and other publicly traded partnerships.

“While it’s still a long way out on the horizon, it’s a step in the right direction,” Colson said in an interview. He rates Boardwalk’s units the equivalent of hold and doesn’t own any.

Before it's here, it's on the Bloomberg Terminal.