Canada’s top pension fund is teaming with an Oklahoma natural gas pipeline and infrastructure business to the tune of $3.8 billion.
The Canada Pension Plan Investment Board’s ($277.8 billion) joint venture will be with natural gas and natural gas products operator Williams Cos. The deal will set up a new platform that helps optimize Williams’ midstream developments in the Marcellus and Utica basins, the US’s largest gas-producing areas.
The move includes Williams’ Ohio Valley Midstream and Utica East Ohio Midstream System, which it just acquired from Momentum Midstream.
Michael Hill, the Canada fund’s managing director of energy and resources, told CIO the region attracted the plan to the joint venture because the basins are “expected to grow faster than other parts of Appalachia as a result of significant takeaway pipeline capacity additions, and increased local demand.”
Pipeline and infrastructure investments in the region spanning Pennsylvania, Ohio, and West Virginia have picked up steam in recent years. Last year, the Canada fund and Encino Energy backed an agreement for a private company to buy all of Chesapeake Energy’s natural gas assets in Ohio.
Canada’s pension board will invest $1.34 billion for a 35% stake. Williams, which has the other 65%, will run the business while also include the projects’ financial results in its fiscal statements.
The Utica East Ohio system processes and performs molecule-separating procedures in natural gasses and natural gas liquids in eastern Ohio’s Utica Shale basin. The platform looks to combine the two systems (Ohio Valley and Utica East) to simplify capital spending in the region. This will also cut operating and maintenance fees while helping local natural gas producers.
The Marcellus and Utica basins are expected to supply about 40% of total US dry gas production by 2023, according to Hill.
“These transactions create a platform for continued optimization and growth, provide deleveraging, reduce capital spending on processing and fractionation capacity for OVM, and unlock further synergies through combined operatorship of the systems,” Alan Armstrong, Williams’ president and chief executive officer, said.