A Marcellus shale-based gathering pipeline system is getting an $89 million equity investment, giving WGL Midstream a 35 percent ownership stake. A WGL Holdings Inc. company, WGL Midstream announced that it exercised the investment option in the Stonewall Gas Gathering System on Feb. 29.
The Stonewall system began operations in November 2015 and is currently gathering 1 billion cubic feet per day (Bcf/d) of natural gas from the Marcellus production region in West Virginia. The system connects to an interstate pipeline system to meet growing demand from markets in the mid-Atlantic region.
“The Stonewall investment is consistent with WGL’s asset-based growth strategy and demonstrates our commitment to bringing the benefits of reliable, affordable natural gas to more customers,” said Terry McCallister, president and CEO of WGL Holdings and Washington Gas. “We are pleased to be a part of a project that is delivering important economic development benefits to West Virginia and throughout the mid-Atlantic region. We expect this investment to be immediately accretive to earnings, adding between $5 and $6 million to pre-tax earnings in fiscal year 2016.”
WGL Midstream secured an option to invest in the Stonewall system as part of an existing supply agreement with Antero Resources Corp., a natural gas operator in the Marcellus and Utica shale region and the current primary shipper in Stonewall. The agreement with Antero includes a firm sales agreement for 330 million cubic feet per day (MMcf/d) to supply mid-Atlantic markets and WGL customers such as GAIL Global (USA) LNG LLC (GGULL), a subsidiary of GAIL (India) Ltd.
In 2014, WGL Midstream executed a gas sale and purchase and capacity agreement with GAIL to sell up to 430 MMcf/d of natural gas, for a term of approximately 20 years, starting on the in-service date of the Cove Point LNG export facility. WGL Midstream expects that the majority of this natural gas would be supplied through its agreement with Antero.
WGL Midstream’s ownership percentage would drop to 30 percent during fiscal year 2016 if other participants join the project as expected.
The Stonewall investment becomes part of a WGL Midstream portfolio focused on capitalizing on the expanding demand for natural gas through investments in storage, transportation and other midstream assets. The Stonewall system has a capacity of up to 1.4 Bcf/d. The 67-mile system collects gas from West Virginia counties, including Doddridge, Harrison and Lewis, and connects with the Columbia Gas Transmission pipeline, an extensive interstate transmission line that reaches markets across the mid-Atlantic region.
Other Stonewall investors include M3 Midstream LLC (Momentum) and Vega Energy Partners. M3 Midstream serves as majority owner and operates Stonewall Gas Gathering LLC.