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PPM Buys Grama Ridge Storage from ConocoPhillips, Plans 2 Storage Expansions

ScottishPower subsidiary PPM Energy announced the purchase of the 4.5 Bcf Grama Ridge gas storage field in southeastern New Mexico from ConocoPhillips last week and launched plans for a storage expansion at Grama Ridge and at PPM's proposed Waha storage field, which is currently on file at the Texas Railroad Commission.

In total, the purchase of Grama Ridge and the expansions are expected to cost $120 million and are part of PPM's plan to more than triple its gas storage capacity by 2010 to 125 Bcf.

PPM plans to bring Grama Ridge's working gas capacity to 6 Bcf and increase its deliverability to 1.5 cycles per year. Grama Ridge sits within 80 miles of the proposed Waha storage project and interconnects with the El Paso Natural Gas, Natural Gas Pipeline Co. and Northern Natural Gas transmission systems. The Waha storage field also will interconnect with El Paso and Northern Natural.

The expansion of the proposed Waha facility in West Texas will bring its working gas capacity to 9.5 Bcf from 7.2 Bcf and PPM plans to amend its application at FERC to reflect the new design, which resulted from strong demand in a recent open season and favorable geologic testing of the salt cavern site. Waha is expected to be built in two phases and begin operations by December 2007.

"Our open seasons show that demand for gas storage is increasing as customers seek ways to deal with natural gas price volatility," said Matt Morrow, president of PPM's ENSTOR unit.

ScottishPower said the combined investment is expected to be $120 million and to achieve returns of at least 300 basis points above PPM's weighted average cost of capital.

PPM also owns 56% of the 46 Bcf Alberta Hub 80 miles west of Edmonton. And it owns the 21 Bcf Katy Hub and storage complex located 20 miles west of Houston.

PPM's storage business also includes the proposed Houston Hub and Transportation Facility in Liberty County, TX. The salt dome project received nearly 11.5 Bcf of market interest during a recent open season. The project is in the process of filing permits for the 18 Bcf storage facility.

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