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OGE Energy, ETP Form Midstream, Interstate Pipeline Joint Venture

OGE Energy Corp. and Energy Transfer Partners LP (ETP) have agreed to form a joint venture combining OGE's Enogex midstream business with ETP's interstate operations and midstream operations in the Rocky Mountains, the companies said last Tuesday.

The venture, ETP Enogex Partners LLC, will be owned and managed by OGE and ETP on a 50/50 basis. The creation of a master limited partnership structure and an initial public offering are scheduled to follow regulatory approval and closing of the transaction.

Oklahoma City-based OGE will contribute to the venture its ownership interest in its gas midstream subsidiary Enogex LLC; ETP will contribute its ownership interests in subsidiary Transwestern Pipeline Co. and ETC Canyon Pipeline LLC, along with its 50% interest in Midcontinent Express Pipeline LLC (MEP). In addition to a 50% interest in the venture, OGE will receive a cash payment of $266 million, the companies said.

ETP Enogex Partners will initially be led by a management team including ETP CEO Kelcy Warren, OGE CEO Pete Delaney, OGE COO Danny Harris and ETP COO Mackie McCrea.

The assets of the new venture will include:

In addition, ETP's 50% interest in MEP -- a joint venture of ETP and Kinder Morgan Energy Partners LP -- would provide access to the 500-mile pipeline extending from southeastern Oklahoma across northeast Texas, northern Louisiana and central Mississippi to an interconnection with Transcontinental Gas Pipe Line (Transco) near Butler, AL. The $1.3 billion, 1.5 Bcf/d project is due to be completed by mid-2009.

The announcement came just two weeks after ETP said it completed two gas projects that add 875 MMcf/d of capacity to its transmission systems -- the 42-inch diameter Carthage Loop pipeline in Texas and the 36-inch diameter San Juan Loop pipeline in New Mexico (see NGI, Sept. 15). In August ETP completed two other projects -- the 135-mile, 36-inch diameter Paris Loop pipeline and 25-mile, 36-inch diameter Maypearl-to-Malone pipeline -- which raised its transportation capacity out of the prolific Barnett Shale of North Texas to more than 3.5 Bcf/d (see NGI, Aug. 11).

ETP said it plans to bring on-line more than 700 miles of gas pipelines this year, with more than 500 miles of pipeline expected to be completed in Texas alone. Other projects expected to come on-line later this year include the Southern Shale, Cleburne-to-Tolar and the Katy Loop pipelines in Texas, as well as the Phoenix Expansion in Arizona, according to Energy Transfer.

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