UPDATE 1-Energy Transfer to build Haynesville gas pipeline

(Adds details, recasts)

NEW YORK, Jan 27 (Reuters) - Energy Transfer Partners LP ETP.N said Tuesday it would build a 178-mile, 42-inch interstate natural gas pipeline stretching from Texas to Louisiana through the heart of the Haynesville Shale.

The Tiger Pipeline is expected to cost between $1 billion and $1.2 billion to construct, depending upon final throughput capacity design, with costs incurred over a three-year period, the company said in a statement.

Initial capacity of at least 1.25 billion cubic feet per day may be increased up to 2 bcf per day based on the results of an open season, the company said.

Energy Transfer agreed to a 15-year firm transportation pact with Chesapeake Energy Corp CHK.N unit Chesapeake Energy Marketing Inc for approximately 1 bcf per day of capacity.

The project will connect to ETP’s pipeline system near Carthage, Texas, extend through the Haynesville Shale and end near Delhi, Louisiana, interconnecting to at least seven interstate pipelines at various points in Louisiana.

Pending regulatory approvals, Tiger Pipeline is slated to begin service by mid 2011.

“Critical infrastructure is needed to relieve growing constraints near the Carthage Hub and to provide takeaway capacity from the Haynesville Shale. The Tiger Pipeline project is another example of how our Partnership works with successful producers like Chesapeake to consummate pipeline opportunities,” said Mackie McCrea, President and Chief Operating Officer of ETP.

“Chesapeake believes the Haynesville Shale has the potential to become the largest producing field in the country,” said Aubrey McClendon, Chesapeake’s Chief Executive Officer.

Energy Transfer Partners owns and operates a diversified portfolio of energy assets with pipeline operations in Arizona, Colorado, Louisiana, New Mexico, and Utah, and the largest intrastate pipeline system in Texas.

Chesapeake Energy Corp is the largest producer of natural gas in the United States, with operations in the Barnett Shale, Haynesville Shale, Fayetteville Shale, Marcellus Shale, Anadarko Basin, Arkoma Basin, Appalachian Basin, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast and East Texas. (Reporting by Eileen Moustakis; editing by Jim Marshall)