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Enbridge, Chevron Consider Deepwater Gas Transport System

Enbridge Inc. may expand its central Gulf of Mexico (GOM) offshore natural gas system to accommodate up to 100 MMcf/d from Chevron USA Inc.'s potential Jack, St. Malo and Big Foot ultra-deepwater developments, the Calgary-based company said last week.

In letters of intent with Chevron, Enbridge would construct, own and operate the Walker Ridge Gathering System (WRGS) to provide gas gathering services. The WRGS, estimated to cost around $500 million, would include 190 miles of eight-inch, 10-inch and/or 12-inch diameter pipeline at depths of up to 7,000 feet, with a capacity of 100 MMcf/d.

"The Gulf of Mexico has long been a major producing region for North American oil and gas, and there is a significant trend towards ultra-deepwater developments in the Gulf of Mexico," said Enbridge CEO Patrick D. Daniel. "The Walker Ridge Gathering System will tie in a new supply source for Enbridge's Manta Ray and Nautilus offshore pipeline systems, enhancing Enbridge's existing offshore pipeline business and establishing a strategic base for future growth opportunities in the ultra-deep Gulf of Mexico. In addition, the development of the new gathering system represents an attractive investment opportunity itself, with risk and return characteristics comparable to Enbridge's normal business model."

In May the Office of Fossil Energy's National Energy Technology Laboratory (NETL) reported that high saturations of gas hydrates were discovered within reservoir-quality sands at Walker Ridge in the Lower Tertiary of the GOM (see NGI, May 18). The NETL completed the tests in collaboration with federal agencies and an industry research consortium led by Chevron.

Chevron is the largest leaseholder in the Lower Tertiary. With joint owners Devon Energy Corp. and StatoilHydro ASA, Chevron owns a 50% stake in both the Jack and St. Malo prospects (see NGI, Sept. 11, 2006). The Lower Tertiary trend, which is around 300 miles wide, previously was estimated to hold 3-15 billion boe of crude and natural gas reserves. The Jack prospect was the first indication that producers might be able to tap the formation.

The potential addition to Enbridge's portfolio "is indicative of a variety of growth opportunities which are currently under development, supporting our expectation that we will be able to extend our 10%-plus 2008-2013 average growth rate at a similar rate well beyond 2013," said Daniel. "Enbridge has ample financial capacity to fund the equity component of this investment from internally generated cash flow and surplus balance sheet equity."

Enbridge offshore pipelines now transport about 40% of all deepwater GOM gas production through the UTOS, Stingray, Garden Banks, Nautilus, Manta Ray, Mississippi Canyon, Okeanos and Destin systems. Enbridge has joint venture interests in 12 transmission and gathering pipelines in six major pipeline corridors in Louisiana, Mississippi and Alabama offshore waters. In total, the Enbridge system moves on average 30% of GOM gas production at a rate of about 2.5 Bcf/d.

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