MarkWest Liberty Midstream & Resources – a majority-owned joint venture of MarkWest Energy Partners L.P. (MWE) – yesterday announced the signing of definitive agreements with subsidiaries of Chesapeake Energy Corp. (CHK) and Statoil Hydro ASA (STO) to process gas at its proposed facility in Majorsville, West Virginia.

MarkWest Liberty is a partnership between natural gas pipeline operator MarkWest Energy Partners and energy infrastructure private equity fund NGP Midstream & Resources L.P. MarkWest has a 60% operated interest in the venture (remaining 40% owned by NGP) that has been formed to construct and operate natural gas midstream services to support producers in the emerging Marcellus Shale play in western Pennsylvania and West Virginia.

The new processing deals are in addition to a previously announced agreement with independent oil and gas company Range Resources Corp. (RRC) that was executed earlier this year. All three contracts include significant acreage dedications and further commitments. MarkWest expects to complete the new 120 million cubic feet per day (MMcf/d) Majorsville processing plant by mid 2010.

As per the deal terms, the hydrocarbon-rich gas produced by Chesapeake and Statoil will be gathered by Columbia Gas Transmission Corp., a unit of natural gas distributor NiSource Inc. (NI), using its infrastructure in Marshall and Wetzel counties in West Virginia. Pursuant to the arrangements MarkWest and Columbia announced in August 2008, the later will supply the gas to MarkWest Liberty’s Majorsville processing plant that is slated to come up adjacent to Columbia’s existing Majorsville compressor station. The hydrocarbon liquids produced at the Majorsville plant will then be linked through a pipeline to MarkWest Liberty’s Houston, Pennsylvania processing complex.

MarkWest Liberty hopes to sell the processed liquids into high-value markets in the northeastern U.S. To facilitate this, the company is looking to set up an approximately 37,000 barrel per day fractionation facility at the Houston complex, in addition to transportation, storage, and marketing infrastructure.

We believe that the agreements with Chesapeake and Statoil will establish Majorsville as MarkWest Liberty’s second major gas processing hub in the highly prospective Marcellus Shale play. MarkWest Liberty is the largest provider of midstream services in the region and is investing a significant amount of capital to provide infrastructure that will be required for the development of the Marcellus Shale leaseholds.

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