Our nation's independent exploration and production companies have no problem producing natural gas these days. Getting that gas to market is a different story.
Bottlenecks in the Rockies have depressed gas prices in that region, while the hurricanes have really roughed up offshore gathering systems. In fact, more than 45% of Gulf of Mexico natural gas was still offline as of Tuesday.
But never fear: Kinder Morgan Energy Partners (NYSE:KMP) and Energy Transfer Partners (NYSE:ETP) are here. They've got a new pipeline plan that's going to plumb the Fayetteville shale for all it's worth.
OK, not all it's worth -- the Fayetteville is massive -- but at 2 billion cubic feet a day, this is one fat pipe. In comparison, REX West, owned by Kinder, Sempra Energy (NYSE:SRE), and ConocoPhillips (NYSE:COP), only sports capacity of a billion and a half per day.
This is a roughly $1.3 billion project, so it's important for the funders to secure shippers well in advance of the in-service date a few years hence. The pipeline is proving popular, with 10-year commitments right off the bat from the biggest producers in the play -- Southwestern Energy (NYSE:SWN) and fresh joint venture partners Chesapeake Energy (NYSE:CHK) and BP (NYSE:BP). Southwestern is on board for 1.2 billion cubic feet a day, while the latter partnership is chipping in 375 million a day. If even more interest is expressed during "open season" bidding that begins next week, this pipeline could plump up quite a bit further.
This project announcement, right in the eye of a credit-market storm, is further evidence of just how solid profit machines like Kinder truly are.
Energy Transfer is a Foolish top pick, sporting a five-star rating in Motley Fool CAPS. Is this one headed for natural-gas nirvana, or pipeline purgatory? Make the call right here.
