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Southern Natural Joins Southeast Supply Header Project

Backers of the Southeast Supply Header (SESH) gas pipeline project -- designed to bring new supplies, including those from the Barnett Shale and Bossier Sands, as well as regasified liquefied natural gas (LNG), to the Southeast market -- are expanding the project to reach new markets in conjunction with Southern Natural Gas (SNG), an affiliate of El Paso Corp.

SESH and Southern have executed a definitive agreement that provides for SNG to jointly own a portion of the pipeline that will comprise the first 115 miles of SESH. The project is a joint venture between subsidiaries of CenterPoint Energy Inc. and Duke Energy Gas Transmission (DEGT). The proposed 270-mile pipeline will bring supplies from the Perryville Hub in northern Louisiana to interconnecting pipelines serving the eastern U.S. and terminate at the Gulfstream Natural Gas System near southern Mobile County, AL. The pipeline is expected to be in service in the summer of 2008.

Under the agreement, SNG will acquire an undivided interest in the portion of the pipeline that will run from Perryville to an interconnection with SNG in Mississippi. The pipe diameter for the jointly owned section will increase from 36 inches to 42 inches, increasing the initial planned capacity of 1 Bcf/d by 140 MMcf/d. Additionally, the agreement provides for a future compression expansion to increase the capacity up to 1.5 Bcf/d, subject to market developments and regulatory approval. With the expansion, SESH will maintain its 1 Bcf/d of capacity on the pipeline with economical expansion opportunities in the future.

Rumblings of a header project such as SESH were heard in early 2005 when DEGT announced plans for its Southeast Supply Hub project (see Daily GPI, Jan. 21, 2005). The SESH project was first announced in November 2005 (see Daily GPI, Nov. 17, 2005). In February project backers announced a successful open season (see Daily GPI, Feb. 3). In August they announced that Florida Power & Light agreed to take about half the capacity on the 1 Bcf/d project (see Daily GPI, Aug. 25).

"We're pleased to have Southern Natural Gas join SESH in ownership of the pipeline, which will provide the ability to access and transport natural gas supplies from onshore natural gas supply basins from the emerging Perryville Hub," said Mark Fiedorek, vice president, asset optimization and storage development, DEGT. "With Southern Natural Gas, the Southeast Supply Header will help ensure Southeast markets have sufficient supply for years to come as an important conduit to move natural gas from onshore basins to these fast- growing markets."

"SNG's investment is indicative of the important role that this pipeline project will play in providing customers in the eastern U.S. access to new sources of supply," said Cy Zebot, chief commercial officer of CenterPoint Energy's pipelines group. "We believe that producers and marketers planning to sell natural gas at the Perryville Hub will welcome their participation."

Several other projects also have been planned to transport gas out of East and North Texas, including one by Energy Transfer, Gulf South and Texas Gas (see Daily GPI, June 3), and a venture by Kinder Morgan and Crosstex (see Daily GPI, May 26).

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