El Paso signs deals with Chesapeake, Statoil for Northeast Upgrade

El Paso Corporation (EP) announced that its wholly owned subsidiary, Tennessee Gas Pipeline Company (TGP), has executed binding, 20-year term agreements with Chesapeake Energy Marketing, Inc., a wholly owned subsidiary of Chesapeake Energy Corporation (CHK), and StatOil Natural Gas LLC, a wholly owned subsidiary of Statoil (STO), for 100 percent of the capacity for its Northeast Upgrade Project. The project will provide 636,000 dekatherms per day of incremental firm transportation capacity from TGP's 300 Line in Pennsylvania to an interconnect in New Jersey to serve growing markets in the Northeast. 

The Northeast Upgrade Project is a natural extension of TGP's presence in the heart of the developing Marcellus Shale play. The project would cost approximately $400 million with a majority of the capital spending taking place during 2013. 

"We are very pleased to add another major pipeline project that provides significant new firm transportation capacity for two prominent Marcellus Shale producers," said Doug Foshee, El Paso's chairman, president, and chief executive officer. "With the previously announced 300 Line Project, we will be adding approximately 1 billion cubic feet per day of new firm capacity that will provide safe and reliable transportation of clean-burning, domestic natural gas supplies to key Northeast markets." 

"We are pleased to enter into this agreement with El Paso," said Aubrey McClendon, Chesapeake's chief executive officer. "It continues our practice of contracting for strategic pipeline capacity, which in this case provides access to premium northeast markets for our growing Marcellus production in Northeast Pennsylvania. We have a long history of transactions with the El Paso family of companies, and this transaction continues that tradition, creating substantial value to both firms." 

A spring 2011 Federal Energy Regulatory Commission filing date is anticipated with a scheduled November 1, 2013 in-service date. An open season is expected to begin this month with final capacity awarded in March 2010.

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