Azure Midstream Energy LLC, a midstream natural gas gathering and processing company based in Dallas, Texas, and the 100% owner of the general partner of Azure Midstream Partners LP (NYSE: AZUR), has begun a growth expansion project within Azure's core Holly Gas Gathering System.
Construction has begun on Azure's Holly Production Optimization Project, which will extend the core Holly footprint and reduce line pressures across Holly, maximizing the utilization of the 2.1 Bcf/d capacity system. Reducing pressure on Holly from over 1,200 pounds per cubic inch to 500 pounds per cubic inch enhances volume deliverability from new and existing production and enhances Azure's competitiveness in attracting additional volumes across its Holly service area.
Azure will also add a 9-mile extension of 12-inch gathering pipeline. The lateral line will connect existing dedicated production on the northwest side of Holly and connect to several prospective undeveloped sections dedicated from existing anchor producers. The lateral can have initial throughput of approximately 40 MMcf/d of natural gas with potential to add more supply in 2016.
Holly Optimization will also add approximately 15,000 horsepower of compression with ultimate capacity of 600 MMcf/d and is expected to be in service by October. Azure expects the total cost of the project to be $24 million and to be materially accretive to Azure's 2015 earnings and beyond.
Holly is primarily located within the DeSoto, Red River, and Caddo parishes of north Louisiana and currently serves the Haynesville and Bossier shale formations and the Cotton Valley formation. As of June 30, the Holly system consists of 335 miles of high- and low-pressure pipeline, with 69,000 dedicated gross acres. The system also includes four amine treating plants with combined capacity of 920 MMcf/d and two 1,340 horsepower compressors with connections to eight downstream access points, providing shippers with access to significant off-take capacity.