Gulf Pipelines Scramble to Serve Burgeoning Production
Three weeks of severe weather in the Gulf of Mexico have left
producers with their heads spinning and have sent Gulf production
on a roller coaster ride, but producers should find some solace in
the large number of pipeline companies scrambling to serve their
growing transportation needs with new projects. In total, the new
pipeline expansions announced last week could add more than 1 Bcf/d
of additional pipeline access to markets for deep-water supplies.
The projects announced by Koch Gateway, Columbia Gulf, Tennessee
Gas and a new agreement involving producers and Dauphin Island
Gathering should alleviate existing pipeline constraints and
provide more flexibility in reaching processing. They add to the
1.6 Bcf/d of new Gulf infrastructure that already has been brought
on line this month.
On the heels of its 315 MMcf/d mainline expansion project,
Mainline '99, which was filed with the Federal Energy Regulatory
Commission in June and should be in service in December 1999,
Columbia Gulf Transmission announced plans to build the Sea Star
Pipeline system. Columbia currently is negotiating with potential
partners to build the new system. It is designed to bring 660
MMcf/d of offshore production to processing facilities at Grand
Isle, LA. The 56-mile project would include a 30-inch diameter
mainline and two 24-inch diameter laterals. It would serve
platforms in the South Pass and West Delta South Addition areas of
the Outer Continental Shelf.
"These projects combine with Mainline '99 to provide a direct
conduit to demand growth markets in the East, Northeast and Midwest
for Gulf of Mexico gas supplies, including those produced in deep
water," said Columbia Gulf President Terrance L. McGill.
An open season for capacity on Sea Star started last week and
will close Sept. 29. Sea Star will offer shippers both firm
transportation service and flex-firm service, as well as
interruptible transportation. To be eligible for flex-firm,
shippers must commit to transport through Sea Star at least 80 Bcf
of proven recoverable reserves at each requested receipt point. Sea
Star firm transportation will have a demand charge of $3.861/Dth,
and a combined volumetric rate of $0.1269/Dth, or the maximum
demand and commodity rates approved by FERC, whichever is lower.
Shippers must agree to a minimum term of 10 years, with service
beginning no later than Dec. 1, 1999.
To provide new capacity downstream of Sea Star, Columbia
announced last week it would add 600 MMcf/d though looping and
compression to its East Lateral, which extends from Grand Isle to
Centerville, LA. However, it faces stiff competition with another
expansion also announced last week by Koch Gateway.
Initially, Koch plans to build a five-mile supply lateral to
connect its mainline to Grand Isle. That first phase will create
300 MMcf/d of downstream capacity at a cost of only $7 million,
which a Koch spokesman said would enable the project to win hands
down in a competition with Columbia.
"It's very low in capital expenditures. We can put it in place
very quickly. We don't need a certificate for the first phase. And
we don't have to have 10-year commitments because we're willing to
take the risk," said Koch Gateway Senior Vice President Renato
Pereira. "We said we'll take minimum three-year terms. If the
producers or shippers don't want to commit immediately, we'll still
build the line. We would just try to get our business done on a
Koch said the costs will fall under its blanket certificate
limits and will cause no rate impact. As a result, Koch can move
forward without filing an application with FERC. Phase II, which is
contingent on demand, would require new pipeline looping and
compression, adding another 300 MMcf/d. Capacity on these projects
is expected to be available in the fourth quarter of 1999.
DIGP Inks Deal with Producers
Meanwhile farther east in the Viosca Knoll area of the Gulf,
Dauphin Island Gathering Partners (DIGP) added some long-term
security to its Phase II expansion, which is slated to be in
service in October adding 1.1 Bcf/d of capacity. DIGP signed an
unique supply and gathering agreement with producers Elf
Exploration Inc., Coastal Oil and Gas, Nippon Oil Exploration
U.S.A. and Pogo Producing, who are partners in the deep-water Virgo
The deal commits the producers' gas supplies from a four-block
unit around Viosca Knoll Block 823 to the DIGP system. In return
DIGP will provide deep-water wellhead production handling services
as well as downstream gathering and transmission services. DIGP
will build a 17-mile, large-diameter gathering lateral to connect
the Virgo platform to the existing DIGP system in the vicinity of
Main Pass-East Addition Block 225. In addition, DIGP will have
rights to the Virgo platform facilities, which will serve as a
strategic hub to attach new gas supplies from other deep-water
The Virgo producers have commissioned construction of a platform
that will be set in 1,130 feet of water in Viosca Knoll Block 823.
Construction of the platform is underway, and pipeline construction
is planned for mid-1999 for an anticipated production startup of
DIGP is a 260-mile pipeline system designed to gather natural
gas supplies from the prolific eastern Gulf. It is the only system
in the region that provides outlets to both Venice, LA, and Coden,
AL. DIGP placed Phase I of its system expansion into service in
April, making it the first eastern Gulf of Mexico pipeline to
transport deep-water gas production to onshore facilities in
Alabama. DIGP is a partnership of subsidiaries of Duke Energy
(37.3%), MCN Energy (34.5%), Coastal (13.6%), Consolidated Natural
Gas (13.6%) and Titan Offshore (1%).
Tennessee Adds Mississippi Canyon Connection
Tennessee Gas Pipeline and Mississippi Canyon Gas Pipeline said
last week they will build a 400 MMcf/d interconnect in Venice, LA.
The project will link deep-water production areas behind
Mississippi Canyon Gathering (a unit of Tejas Offshore) with market
areas served by Tennessee. Tennessee plans to accept nominations at
this new point starting with April 1999 flows. Tennessee is
conducting a binding open season that ends Sept. 25. Successful
bidders in the open season will be announced on September 28, 1998.
"Construction of this new interconnect, paired with the just
completed expansion of our South Pass system, demonstrates our
continuing commitment to addressing the needs of Gulf of Mexico
producers," said Tennessee Gas President John Somerhalder II.
Tennessee added 200 MMcf/d of new capacity to the severely
constrained South Pass system in August.
Destin, Mobile Bay, Tennessee Additions
Other recent capacity additions in the Gulf include Destin
Pipeline, which put 1 Bcf/d of capacity into service Sept. 1 from
Main Pass 260 to Pascagoula, MS, where it connects with Florida Gas
and Koch Gateway. The pipeline expects to complete its northern
portion, from Pascagoula to connections with Transco, Southern
Natural and Tennessee in Clark County, MS, by mid-November. A
Destin spokesman said the pipeline expects to be flowing 300 MMcf/d
by the end of the year, 600 MMcf/d by the 3Q99 and the total 1
Bcf/d in 2000 or 2001. Current throughout is 100 MMcf/d.
Transcontinental Gas Pipe Line completed Phase I of its Mobile
Bay lateral expansion this month, bringing on line 350 MMcf/d of
capacity. Phase II is expected to increase capacity by 136 MMcf/d