Dynegy, Texaco Join Permian Gathering, Processing
Consolidation in the midstream business continued last week with
the announcement Texaco and Dynegy had formed Versado Gas
Processors LLC. Versado is a joint venture of both companies'
processing facilities in southeast New Mexico and associated gas
gathering assets in New Mexico and West Texas. The new company will
operate facilities with a combined processing capacity of 341
MMcf/d of gas. Texaco will own 37% while Dynegy will own 63%.
Dynegy will operate the plants under contract with Versado.
Included in the joint venture are Texaco's Buckeye and Eunice
North and South gathering systems and plants, and Dynegy's Eunice,
Monument and Saunders Complex gathering systems and plants.
However, Buckeye, which has capacity of 23 MMcf/d but only
processes about 8 MMcf/d currently, is slated to be shut down in
the next six months.
"This joint venture will allow us to gain efficiencies in
operations and economies of scale, as well as strengthen the
position of both companies as long-term gas processors in southeast
New Mexico. This type of rationalization is further evidence of an
overall restructuring initiative undertaken by Dynegy to build
profitability, effectively utilize assets and improve performance
as we continue to grow the liquids business," said Steve Furbacher,
president of Dynegy Midstream Services, formerly Warren Petroleum.
The consolidation arrangement is certainly not unique in the
midstream sector of the industry, Furbacher said. "That whole area
has four, maybe five, competitors who have systems that are all
intertwined, so there are big segments of the system that overlap."
As the Permian Basin is a mature play, it's imperative to improve
plant utilization so as to reduce costs through cutting compressor
fuel consumption and other measures, Furbacher said. "At this point
we don't intend to shut any other facilities down, longer term we
might, but we're going to be moving gas in between the facilities,
so we're going to be putting in pipe to interconnect the plants."
In Waskom, TX, where Dynegy is a partner in a facility with
Amoco and NorAm, it's possible another partner could be added to
increase efficiency, Furbacher said. "We'll do it in other places
where it makes sense."
Creation of Versado Gas Processors enhances Texaco's
competitiveness in southeast New Mexico gas and liquids, said Steve
Hadden, vice president of Texaco North America Production. "We
expect the combination of these assets will allow us to become the
most efficient operator in that important market and in so doing
add shareholder value."
Joe Fisher, Houston
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