UPDATE 1-Kinder, Energy Transfer in US South gas line pact

(Adds details, recasts)

NEW YORK, Oct 1 (Reuters) - Kinder Morgan Energy Partners LP (KMP.N) and Energy Transfer Partners LP (ETP.N) said Wednesday their Fayetteville Express Pipeline LLC joint venture will build a new $1.3 billion, 187-mile natural gas pipeline in the southern United States.

The line, with an initial capacity of 2 billion cubic feet per day, will originate in Conway County, Arkansas, and continue eastward through White County, Arkansas, to an interconnect with Trunkline Gas Co in Quitman County, Mississippi.

Kinder Morgan Chairman and CEO Richard Kinder said in a statement the pipeline access and capacity in the Fayetteville Shale was important to help meet America's future energy needs by limiting disruptions like those caused to offshore Gulf of Mexico production this year from hurricanes Gustav and Ike.

The Fayetteville Shale is located on the Arkansas side of the Arkoma Basin and has estimated recoverable reserves of near 30 trillion cubic feet, approximately the same size as the Barnett Shale in Texas, according to Navigant Consulting Inc.

First Quarter 2008 production in the Shale was about 500 million cubic feet per day and is expected to ramp up further. Producers forecast production could peak at about 6 bcf per day.

Pending regulatory approval, the new pipeline is expected in service by late 2010 or early 2011.

The companies said they secured binding 10-year commitments from both Southwestern Energy Services, a wholly owned subsidiary of Southwestern Energy Co (SWN.N), and from Chesapeake Energy Marketing Inc, an affiliate of Chesapeake Energy Corp (CHK.N).

The line will transport gas from Chesapeake's portion of the shale play, of which BP America (BP.N) owns a 25 percent stake, Chesapeake said a separate statement.

SES also said in a statement it would be a "foundation shipper" for the project, using the line primarily to deliver gas produced from its portion of the shale in central Arkansas.

The line will also interconnect with Natural Gas Pipeline Co of America (NGPL) in White County, Arkansas, Texas Gas Transmission in Coahoma County, Mississippi, and ANR Pipeline Co in Quitman County, Mississippi.

NGPL is operated and partially owned by Knight, Inc, which owns the the general partner of KMP.

To gauge further shipper interest, and possibly increase the capacity on the line, the companies said they would conduct a binding open season beginning Oct. 8 and ending Nov. 7. (Reporting by Eileen Moustakis; editing by Jim Marshall)