Interstate natural gas pipeline Questar’s desire to buy a16-inch-diameter under-utilized oil pipeline from New Mexico toCalifornia with the intention of converting it to a 120-130 MMcf/d,700-mile interstate natural gas pipeline is drawing contrastingresponses from the two natural gas utilities here in SouthernCalifornia.

The nation’s largest gas distributor, Southern California Gas,is keeping a wary eye on the deal, having unsuccessfully opposedtwo new interstate pipelines into the state early in this decade. Neighboring municipal gas utility, the City of Long Beach GasDepartment, where the converted pipeline would terminate is veryinterested in tying in with a new supplier.

The pipeline that Questar Pipeline Co. intends to buy from ARCOPipe Line Co., Houston, originates in the Paradox Basin in NewMexico, crossing into California at the Arizona border and endingin Long Beach (population 440,000), the state’s fifth largest cityand a major international port paired with the City of Los AngelesHarbor.

The city-operated Long Beach Gas Department attempted to buy thepipeline eight years ago, but negotiations broke down, according toChris Garner, general manager of the department. He thinks hisdepartment is a logical potential customer for Questar andindicated the department will be meeting with the pipeline laterthis month.

“We’re very interested in that pipeline,” Garner said. Fromone-third to half of Long Beach’s supplies come from local sourceswithin the city, which sits atop one of the 20th Century’s largestoil fields. The rest of the supplies come from out of state, mostin and around the San Juan Basin. The department buys its ownsupplies and has a five-year transportation agreement with SoCalGasthat expires at the end of next year, Garner said.

Long Beach has a daily load of about 35 MMcf, or 13 Bcfannually.

It has 150,000 customers with annual gas revenues of about $75million. SoCal officials indicated they will monitor the Questarproject, which could be the third new interstate gas pipeline intoCalifornia in less than a decade, for its timing (expected to becompleted in the next 18-24 months) and the competitive rate itcharges.

Constructed in 1957 to ship crude oil, the purchase by Salt LakeCity-based Questar includes ARCO Lines 90, 91 and 92 for $40million. Questar will seek Federal Energy Regulatory Commissionapproval to convert it. Successful oil-to-gas conversions havetaken place elsewhere, and Questar calls the ARCO pipelines”readily convertible,” which will include reconditioning and theaddition of compression.

“Our strategy is to expand our transmission footprint,” saidNick Rose, Questar Pipeline’s president/CEO, noting the pipeline’slocation is “strategically significant” for several reasons:

“It complements others’ projects already in progress; itprovides access to significant natural gas supplies (in the SanJuan Basin) and markets; and it gives us access to other majorinterstate pipelines serving the California market. Access tothose lines allows us the flexibility of developing service insegments depending on market development.”

At the beginning of this year, the CEO of the pipeline’s parent,$1.9 billion Questar Corp., emphasized that the company intended tospend more than $300 million in capital this year in support of itsfive-year goal of doubling both its capital and gas/oil reserveholdings. From1992 through 97, Questar reportedly spent $1billion in capital additions and increased its gas reserves to 1Tcf.

“We’re looking to spend $2 billion over the next five years,”Questar CEO R. D. Cash said at the outset of 1998.

Richard Nemec, Los Angeles

©Copyright 1998 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.