Conoco Inc. enhanced its natural gas portfolio last week,announcing an agreement to acquire LG&E Energy Corp.’s naturalgas gathering and processing business assets in New Mexico, Texas,Oklahoma and Montana. The deal will make Conoco the second largestnatural gas gatherer in the region, more than doubling its capacityin southeast New Mexico and improving its processing capacity inthe region by 42%.

In the deal, the Houston-based company will acquire threenatural gas processing plants in New Mexico and Texas with acombined processing capacity of 86 MMcf/d. Also included in theacquisition are a natural gas storage facility and 1,200 miles ofnatural gas pipelines. Financial terms were not disclosed.

“The properties are a significant enhancement to Conoco’snatural gas portfolio and allow us to continue building larger andmore integrated natural gas operations in markets where we canestablish a competitive advantage,” said Mike L. Johnson, vicepresident for natural gas and gas products.

Integration of the new assets with Conoco’s existing New Mexicooperations in Maljamar, NM “creates one of the largest” gathering,processing and transportation systems in the region, said Johnson.

“The existing Maljamar operation is primarily a low-pressure gassystem, while the LG&E assets are mostly high pressure,”Johnson said. “The systems are highly complementary, and whencombined will create a business of sufficient size and scale tomake Conoco even more competitive in the region’s natural gasbusiness.” He said the acquisition also would leverage Conoco’snatural gas and natural gas liquids marketing programs inCalifornia.

Combined with LG&E’s assets, Conoco will have 1,500 miles ofgathering systems with a capacity in excess of 300 MMcf/d, fournatural gas processing plants with 165 MMcf/d capacity and storagecapacity of 10 Bcf. Some of the LG&E assets that do not “fit”with Conoco’s natural gas business strategy will be sold, Johnsonsaid.

Carolyn Davis, Houston

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