Penn Virginia Resource Partners, L.P. (PVR) announced that its midstream division began commercial operation of the first section of its natural gas gathering system in Lycoming County, Pennsylvania. .
PVR's Lycoming system, the first large-diameter gathering pipeline operational in the north-central Pennsylvania Marcellus fairway, provides more than 850 million cubic feet per day (MMcf/day) of capacity on its 30-inch trunk line and connects natural gas producers' operating wells to the Transcontinental Gas Pipe Line Company, LLC ("Transco") interstate pipeline system. This new system is PVR's second gathering system in the Marcellus region; PVR began operation of a 12-inch gathering system in Wyoming County last year.
As previously announced, Range Resources Corporation (Range), through a subsidiary, has contracted for significant firm capacity on the Lycoming system, and PVR will be compensated for the compression and gathering services provided to Range through a combination of volumetric fees and fixed charges with no direct commodity exposure. The agreement with Range establishes an area of mutual interest (AMI) in north-central Pennsylvania, and PVR is currently constructing additional pipeline and related facilities to extend and expand the service area of this new system.
PVR is also currently in negotiations with other area producers, and expects to receive commitments for additional available system capacity and related services. PVR plans to extend the system into southern Tioga County which will provide producers in that area with better access to premium northeast markets through the Transco pipeline.
William H. Shea, Jr., Chief Executive Officer of PVR's general partner, said, "We are excited by the continuing opportunities to participate in unlocking the great economic potential contained in the natural gas reserves of the Marcellus Shale. We look forward to continuing to work closely with Range and other area producers to meet their gathering and compression needs, and to provide the critical transportation links to interstate carriers and end-use markets.
As the first operational large-diameter gathering pipeline in the region, we offer a distinct competitive advantage to current and potential shippers, and we expect that our well-positioned assets and responsive customer service will enable us to continue as the leading midstream provider in our service area," said Mr. Shea. "With construction work on-going to extend both this new Lycoming system, as well as our existing gathering system operating in the Wyoming County area, we expect to significantly expand the scope and activity of our Marcellus area businesses."