Enterprise Products Partners LP announced Tuesday that its affiliate Enterprise Gas Processing LLC has purchased Piceance Creek Pipeline LLC from EnCana Oil & Gas (USA) Inc., a wholly owned subsidiary of EnCana Corp., for an undisclosed amount.
The assets of Piceance Creek Pipeline, LLC consist primarily of a recently constructed 48-mile, 36-inch diameter natural gas gathering pipeline in the Piceance Basin of northwestern Colorado. As a part of the transaction, EnCana has signed a long term, fixed-fee gathering contract and dedicated significant production to the system for the life of the associated lease holdings, Houston-based Enterprise said.
The Piceance Creek Pipeline will be renamed the Piceance Creek Gathering System (PCGS) under Enterprise ownership, and will have a capacity of 1.6 Bcf/d. The system extends from a connection with EnCana's 32-mile, 24-inch diameter Great Divide Gathering System near Parachute, CO, northward through the heart of the Piceance Basin to Enterprise's 1.5 Bcf/d Meeker gas treating and processing complex, which is currently under construction.
The connection to the Great Divide system will provide the PCGS facilities with access to production in the southern portion of the basin along the I-70 corridor, including production from EnCana's Mamm Creek field. Enterprise said it plans to put the PCGS facilities in service this month with initial volumes of 500 MMcf/d of gas, ramping up to 625 MMcf/d by year-end 2007. A significant portion of the volumes will be produced by EnCana, one of the largest gas producers in the region.
"This acquisition and long-term gathering agreement with EnCana, along with Enterprise's previously announced Meeker treating and processing complex and the recent 30-year midstream services agreement with ExxonMobil, positions Enterprise to become a premier midstream player in the Piceance Basin," said Enterprise President Robert G. Phillips. "Additionally, this new pipeline system is expected to provide producers throughout the basin with a direct conduit to the Meeker complex, as well as pipeline access to Enterprise's Mid-America natural gas liquids (NGLs) pipeline system and interconnects with various interstate natural gas pipelines that export gas from the Rocky Mountain region, including the new Rockies Express Pipeline."
Phase I of the Meeker complex, which is supported by commitments from EnCana, is on schedule for a mid-2007 start up, and will be capable of treating and cryogenically processing up to 750 MMcf/d of natural gas and extracting as much as 35,000 b/d of NGLs, Enterprise said. Supported by additional commitments from EnCana, Phase II will expand capacity of the Meeker facility to 1.5 Bcf/d and 70,000 b/d of NGLs. Phase II is expected to be completed in mid-2008. The expansion of the partnership's Mid-America Pipeline system, now under construction, will provide increased export capacity for NGLs produced from Meeker and elsewhere in the Rocky Mountain region, including the Piceance Basin.
Current natural gas production from the Piceance Basin, which covers approximately 6,000 square miles, exceeds 1 Bcf/d from more than 4,800 wells and has been growing at an annualized rate averaging 25% over the past five years. With third-party estimates suggesting 20 Tcf of undeveloped reserves, the Piceance Basin offers long-term opportunities for Enterprise to continue to expand its system to serve producers developing this extensive resource play, the company said.
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