Oklahoma producers are eyeing the pending purchase of Shellsubsidiary Transok by OGE Energy subsidiary Enogex with cautiouslyoptimistic eyes. While the sale would double Enogex’s pipelineholdings, it’s not clear to Oklahoma market participants whateffect the deal will have on competition.

“We’re kind of taking a wait and see attitude,” said one traderactive in the Midcontinent. Will there be objections? “Aw heck, youknow somebody’s going to [object to the deal] just because theywant to. Most of the gathering between the two companies has beenpretty competitive in the past. I can’t see that there’s going tobe any large objections from anyone where it would maybe jeopardizethe deal.”

For the record, competitor Oneok has no plans to contest thedeal. “We’re not gearing up to do anything in this, but certainlyit would be something that would be of great interest,” said Oneokspokesman Weldon Watson. “There are no plans on our part toobstruct or try to keep this from happening.”

Taking a somewhat more proactive approach is the natural gascommittee of the Oklahoma Independent Petroleum Association (OIPA).Last Friday committee Chairman Mike Cross, president of OklahomaCity-based Twister Gas Services LLC, hosted a meeting of about 10,including Enogex representatives, to discuss the potential threatto competition the deal may cause. An initial eyeballing of systemmaps showed little reason for concern, Cross said, noting there arefew areas where Transok and Enogex are the sole competitors.

“Until we spend this weekend and the next few days looking intothis, I can’t even tell you of a problem that I know exists rightthis minute.”

One area where the producers at least were concerned is with thefunding of the purchase. “We wanted to make sure the way to pay forit wasn’t going to be to raise rates for producers,” Cross said.After listening to Enogex representatives at the Friday meeting,Cross said the producers don’t expect any rate increase at thepresent time on either the Enogex or Transok systems.

Mickey Thompson, OIPA executive vice president said, “I don’thave any problem saying historically Enogex, relatively speaking,has been pretty fair as a gas gatherer in Oklahoma. That is, Ibelieve, in their favor. I think it would be remiss on our part ifwe weren’t worried about [the deal].” Thompson noted his membershipis hoping recently passed gas gathering legislation will be enoughto provide producers an avenue to redress grievances at theOklahoma Corporation Commission.

A spokesman for the Oklahoma Midcontinent Oil & GasAssociation said the group hasn’t examined the deal closely.

Enogex has 4,700 miles of pipeline with 1998 throughput of 685MMcf/d. The company had natural gas liquids (NGL) production of10,000 barrels/d and has 5 Bcf of storage. Transok has 4,900 milesof pipeline with 1998 throughput of 1.2 Bcf/d, NGL production of25,000 barrels/d, and 18 Bcf of storage. Benefits of the Transokacquisition, according to Enogex, include increased earnings andcash flow, increased transportation capabilities, and additionalmarketing flexibility due to increased storage. Enogex says thedeal will give producers more options, gas customers more supplyoptions, and create a strong competitor in the deregulated gasmarket. Enogex plans to fold Transok administrative and fieldoperations into its Oklahoma City, OK, headquarters. However, apresence will be maintained in Tulsa.

Another Midcontinent trader said there are several obviousreasons Enogex wants Transok. “The first is to increase theirmarket share, which [the deal] does. In the natural course ofincreasing their market share they are also decreasing competition.The other reason is to capture some of the [East-West Oklahomapricing] spreads out there. Historically, there is about an 8- to10-cent spread between the West and the East, which makes itprofitable to transport gas from the West to the East.”

Enogex will be able to “re-optimize” the Transok system as thetwo serve slightly different markets, the trader noted.

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