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Natural gas processing plant to be built in Texas, US

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LNG Industry,

Sanchez Energy Corp. has announced that it has entered a joint venture (JV) with Targa Resources Partners LP to construct a cryogenic natural gas processing plant in La Salle County, Texas, US. Alongside this, the JV will build accompanying high pressure gathering pipelines in the Eagle Ford Shale, which will connect Sanchez Energy’s Catarina asset to the new project. Sanchez Energy aims to invest approximately US$115 million and receive a 50% ownership share of the plant, as well as the approximate 45 miles of high pressure gathering pipelines. Targa, meanwhile, will hold all of the transportation capacity on the pipeline, with the gathering JV receiving transportation fees. The processing plant will have an initial capacity of 200 million m3/d, with the capability to expand to 260 million m3/d.

Tony Sanchez III, the CEO of Sanchez Energy, said: “These South Texas midstream JVs are a key part of our strategy aimed at capturing opportunities across the hydrocarbon value chain.

“Our participation in the JVs and commitment to anchor these projects are expected to result in access to attractive midstream assets that are central to Sanchez Energy's major development activity in South Texas.

“The modern plant design is expected to deliver better liquids yields and lower processing fees, resulting in lower operating costs, higher net-backs, and greater price realisation on our natural gas liquids revenue stream. The JVs are expected to also improve our access to end markets, including the developing Mexico and global LNG markets, and provide opportunities to increase revenue through utilisation of the new midstream system to transport and process third party volumes.

"Importantly, these South Texas midstream assets are expected to provide stable cash flows which a master limited partnership may find attractive and financeable at favourable rates. As the project develops, we intend to explore potential alternative financing or other options for the JVs to maintain our liquidity, while also exploring whether there are any mutually beneficial funding strategies with Sanchez Production Partners LP that might be attractive to us. We look forward to updating the investment community as our plans advance."

The plant is estimated to be completed and ready for operations by early 2017.

Edited from press release by David Rowlands

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