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Canada Pension Fund Boosts U.S. Shale Presence with $3.8 Billion JV

The Canada Pension Plan Investment Board announced it was expanding in U.S. shale gas through a US$3.8-billion joint venture with U.S. independent energy company Williams.

The new company will be a pipeline operation and will focus on the Marcellus and Utica shale plays, which are the most prolific in natural gas production.

The transactions leading to the establishment of the joint venture involve CPPIB buying a 35-percent stake in Williams’ wholly owned Ohio Valley Midstream pipeline system for US$1.34 billion and Williams buying out its partner Momentum Midstream in another pipeline system, the Utica East Ohio Midstream.

“This joint venture will provide CPPIB additional exposure to the attractive North American natural gas market, aligning with our growing focus on energy transition,” a CPPIB official commented, reflecting the rising interest in investments across the shale patch

This has been particularly true in shale gas-producing regions where drilling has boomed in recent years, but pipeline capacity has been slow to catch up, as Reuters notes in a report on the news.

Earlier this month, this industry segment saw another large deal: Equitrans Midstream Corp. bought majority stakes in two pipelines connecting the Marcellus and Utica plays for US$1.03 billion from a Morgan Stanley-managed fund.

Chances are as demand for gas continues to rise and so does production in these prolific plays, we will see more deals of this kind. Unlike oil pipelines, it seems that gas pipeline at least in this part of the United States, are not such a matter of contention between the industry and the environmentalist lobby, which makes the segment ripe for M&A activity as drilling increases.

However, there is opposition from landowners in the area whose territory pipeline builders are encroaching on. A group of affected homeowners this month approached the U.S. Supreme Court arguing that energy companies were abusing the eminent domain rule.

By Irina Slav for Oilprice.com

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