McClendon’s American Energy, Regency to build $500M Utica pipeline

HOUSTON – A $500 million pipeline planned for next year could carry natural gas from Aubrey McClendon’s growing web of gas wells in Ohio to the Gulf Coast and several mid-western and southern states.

The midstream arm of American Energy, the new oil and gas venture of former Chesapeake Energy CEO McClendon, said Thursday it is teaming up with Dallas pipeline operator Regency Energy Partners to build a pipeline starting in Ohio’s Utica Shale that could push more than 2 billion cubic feet of natural gas per day across 52 miles to major pipeline systems that service Texas, Colorado and states along the nation’s southeastern rim.

The pipeline would start in the Utica Shale, where American Energy has spent $3.5 billion amassing more than 260,000 net acres over shale gas deposits. The firm plans to drill 1,600 net wells there in coming years as McClendon, one of the first wildcatters to pounce on U.S. shale gas plays, builds a new company after his departure from Chesapeake Energy last year.

McClendon has concentrated his efforts in the southeastern corner of the Utica, where high reservoir pressures have made reaching wet gas more affordable. Recent research by Houston energy research firm Wood Mackenzie shows that certain zones in the Utica rival wells in Pennsylvania’s Marcellus Shale, in terms of profitability.

In a written statement, Art Cantrell, senior vice president of the eastern region for Regency, said the pipeline will be the “main takeaway option for Utica development,” connecting Utica gas to the Rockies Express Pipeline, partly owned by Houston-based Phillips 66, and the southern end of Sempra Energy’s Texas Eastern Transmission pipeline, which runs through Texas, Louisiana, Mississippi and Arkansas.

The project, expected to be complete in the third quarter of next year, will involve building gas compression units with a combined 25,000 horsepower. The companies said they could boost the pipeline’s overall delivery to 3.5 billion cubic feet per day if they connect the line to another northern pipeline, but they did not go into detail.

Regency, which will build and operate the pipeline, is expected to pay for the lion’s share of the joint venture’s $500 million costs, while American Energy Midstream will cover a quarter of the investment.