Sanchez Energy Corporation and Targa Resources Partners LP have announced a joint venture agreement through which they will share construction costs and ownership of a new cryogenic natural gas processing plant. Cryogenic plants are facilities which specialize in supercooling natural gas for distillation purposes. It is still unclear whether the joint venture will have access to the power of eminent domain. It is likely that the additional pipeline will pass through privately owned land. But whether the joint venture will be able to take the land, hinges on whether the plant’s operational parameters qualify as public use. The plant has a projected capacity of 200 million cubic feet of natural gas per day, with the possibility to increase future production to as much as 260 million feet of natural gas per day. Operational requirements of the plant dictate that an additional 45 miles of pipeline must be constructed to connect it to Sanchez Energy’s existing Caterina gathering system. The plant will be located in La Salle, Texas.
Sanchez Energy will invest approximately $115 million in the plant’s construction costs and will receive a 50% ownership stake as well as the new pipelines. Targa will contribute approximately $125 million, and receive a 50% ownership stake plus all of the transportation capacity on the pipeline. They will also be responsible for the actual construction of the plant. The joint venture will collect fees for the transportation of product on behalf of the two companies, has the option to expand production capabilities, and if necessary, utilize additional land. The plant should be operational by 2017.
Co-authored by Christopher Chan and Justin Hodge.