To prepare for El Paso Energy’s looming takeover of Coastal Corp., Westcoast Energy Inc. and Coastal last week split up Engage Energy, their three-year-old marketing venture, with each retaining a half interest in the Houston-based gas marketer.

Coastal, headquartered in Houston, will merge with El Paso Energy in a $16 billion deal by the end of the fourth quarter (see NGI, Jan. 24), and company officials said that several transactions needed to be completed before the merger could be finalized, including dismantling the Engage venture. Vancouver-based Westcoast and Coastal each own 50% interest in Engage, which has 12 regional offices throughout North America and employs 300. One of the top North American gas marketers, it purchases natural gas from every producing basin in North America, and trades electricity within all NERC regions. Engage estimates it will add another 1 Bcf/d to its natural gas deliverability by the end of this year.

NGI ranked Engage in 12th place in its 1999 North American power marketers list, dropping from eighth place in 1998, losing about 15.2% in sales. Engage reported a sales volume of 5.6 Bcf/d last year, compared with 6.6 Bcf/d the previous year. It sold an estimated 2,100 Bcf of natural gas in 1999.

Westcoast and Coastal formed Engage in 1997 to offer a full spectrum of energy services, including natural gas marketing and trading, electricity trading and sales, energy management services, structured storage and transportation-related services, structured power and management services and energy risk management services. The companies said that those services would continue as before. There is expected to be little impact on either company’s existing asset valuation.

Under the restructuring plan, Westcoast will retain the Engage Canadian business entity and certain natural gas and power activities in the United States. Westcoast also will retain the right to use the Engage Energy name and will continue to conduct business from Calgary, Southfield, MI and other U.S. locations. Coastal will retain the U.S. business entity, with headquarters in Houston.

“By taking full ownership of our natural gas and electricity marketing and trading functions, we can better capitalize on the knowledge, experience, track record and infrastructure that we have built over the past three years,” said Michael Phelps, Westcoast CEO.

When Coastal merges with El Paso, it will be joining a company that already has a strong gas marketing arm. NGI ranked El Paso seventh on its list of gas marketers in 1999, noting that it traded 6.7 Bcf/d of natural gas last year. It also was ranked seventh in 1998.

Carolyn Davis, Houston

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