NiSource and Hilcorp form Utica Shale Joint Venture

Written By Brianna Panzica

Posted July 9, 2012

Indiana-based NiSource Inc. (NYSE: NI) has announced a joint venture with Texas’ Hilcorp Energy Company to develop the Utica Shale in Ohio and Pennsylvania.

Called Pennant Midstream, the joint venture will focus on building gathering pipeline infrastructure and processing facilities for natural gas liquids (NGLs).

For the first phase of the project, 50 miles of pipeline facilities will be constructed in the Utica shale region, and a cryogenic NGL processing plant will also be built in Ohio.

The initial capacity of the NGL processing plant will be around 200 million cubic feet (mcf) per day.

Construction for phase one, which is worth roughly $300 million, is set to begin later in 2012.

Robert C. Skaggs, Jr., President and CEO of NiSource, told MarketWatch:

“This joint venture, involving one of America’s most respected and successful energy production firms, leverages NiSource’s extensive asset base and operating experience in the Utica Shale region to create near-term value, as well as long-term sustainable growth for our customers and shareholders.”

NiSource will provide 400 mcf of wet and dry gas per day initially, with the potential to expand.

The company has yet to announce the counties where the pipeline will be located, but a spokesman for the two companies said they will be revealed as the pathway is planned out.

NiSource and Hilcorp have also agreed to a second joint venture in which they will develop hydrocarbon potential in the Utica-Point Pleasant Shale area. NiSource will be a non-operating working interest owner and Hilcorp will be operator and manager.

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NiSource COO and president of Midstream & Minerals Group Joseph A. Blount, Jr. told the Sacramento Bee:

“These two joint ventures with Hilcorp allow us to maximize the value of our acreage by leveraging Hildcorp’s widely recognized expertise in hydrocarbon exploration and development, while also providing a great foundation from which to provide midstream services and solutions, including gathering, compression, processing and liquids handling for other Utica producers in eastern Ohio and western Pennsylvania.”

The Utica Shale formation is in earlier development stages than other formations, like North Dakota’s Bakken, which has created boomtowns. How much technically recoverable oil is in the formation has yet to be determined.

But there are over 200 approved wells in the area. Chesapeake Energy (NYSE: CHK) holds a huge stake in the region. And other big companies, like CONSOL Energy (NYSE: CNX) and Marathon Petroleum (NYSE: MPC), are getting involved.

NiSource and Hilcorp’s ventures will provide the infrastructure necessary in developing the shale play and contributing to Ohio’s shale oil and gas production.

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