El Paso and KKR form midstream joint venture

A unit of Houston’s El Paso Corp. and private equity firm Kohlberg Kravis Roberts & Co. announced a new joint venture that will own and run an El Paso pipeline and other assets in Utah and invest in projects in emerging U.S. shale formations.

Under the agreement, KKR will pay $125 million to acquire a 50- percent stake in El Paso’s gathering and processing assets at a field in Altamont, Utah.

Those assets include roughly 800 miles of pipelines, 3,800 barrels per day of fractionation capacity and 40 million cubic feet per day of natural gas processing capacity, the companies said in a joint statement this morning.

El Paso currently has two drilling rigs in Altamont with plans to add a third next year and to reach six by 2013. The growth could create expansion opportunities for the new midstream joint venture, the companies said.

In addition, each joint venture partner pledged $500 million for future midstream projects including an ethane pipeline system in the Marcellus shale play in the northeastern U.S. and the Camino Real pipeline in South Texas’ Eagle Ford shale play.

Mark Leland, president of El Paso Midstream Group, said KKR is a good partner because of its success and experience as an investor in energy-related infrastructure. “We believe that the combination of our two companies creates a strong competitor in the midstream space,” he said.

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