Aquila Buys Katy Hub and Storage from Western Gas
Lured by the chance to be a main supplier for the wealth of
gas-fired power plants planned for Texas, Aquila Energy bought the
Katy Hub from Western Gas Resources Monday. The $100 million deal
is expected to close by April 30, although it still needs to clear
the Federal Trade Commission's Hart-Scott-Rodino Act.
The 2,200-acre subsurface Katy storage facility has a total
capacity of 27.2 Bcf. It connects to 11 pipelines including
Transco, Tennessee, Koch, Oasis and Lone Star. The facility has an
operational withdrawal capacity of 52.5 MMcf/d and an injection
capacity of 25 MMcf/d.
"This will become a very important asset in North American
markets as new gas-fired power plants are bought onstream in the
next few years," said Ed Mills, Aquila COO. Aquila expects
5,000-8,000 MW in new gas-fired generation to go onstream in Texas
between 1999 and 2001. "That's the area we hope this storage
facility will service," said Ethan Hirsh, an Aquila spokesman.
Hirsh said Aquila is involved in negotiations with power plants
already but could not provide more information.
"We liked the fact that the Katy Hub is a big name throughout
the industry, as well as the fact that 11 different pipelines
connect to it," said John Shealy, vice president of Aquila Natural
Gas Partners Group. "On the storage side, it significantly
increases our available capacity, and on the marketing side the
deal allows us to offer a wider range of services to our
The purchase represents Aquila's entrance into the Gulf Coast
storage market. Hirsh said this facility is Aquila's first
wholly-owned storage plant in the area.
"I think it will work out very well for us," an Aquila marketer
said. "We have interest in the Oasis pipeline, which runs right
into the storage facility, but until now, it didn't have much
storage on it. If this deal goes through, I think it will help out
a great deal operationally. We'll have a whole lot more control
over what gas goes where and a lot more flexibility." Aquila owns
35% of the Oasis pipeline.
For Western Gas, the sale marks a change in focus. "We had
previously announced that we wanted to sell off $100-150 million in
order to reduce debt and redeploy dollars," said Ron Wirth, a
Western Gas spokesman. "Although the Katy Hub has been a solid
asset for us, We felt we could provide the same service to our
customers without owning the Hub, as well as increase our
investments to our Wyoming operations." Western Gas is leasing 3
Bcf at the facility from Aquila, and Wirth said Western Gas also
leases from other storage facilities in the area.
Western also announced the sale of the Giddings Gathering System
in the Austin Chalk region of Southeast Texas. An undisclosed party
purchased the $36 million system. Throughput in 1998 for the system
was 50 MMcf/d.
"Certainly these two sales largely meet the goals we set out to
attain," Wirth said. I'm not saying that's it. There might be some
miscellaneous deals still to come. But primarily, these were the
two deals we had in mind."
Western Gas' Wyoming operations include an interest in 800,000
acres of the Powder River Basin. Wirth said Western produces,
ships, and sells gas produced from these assets. The company has
plans to expand development in areas of Southeast Wyoming.