DCP Midstream Partners LP has bought a Colorado-to-Kansas natural gas liquids (NGL) pipeline system from Buckeye Partners LP for $22 million in cash, the companies said Thursday. The partnership said the acquisition supports its expansion efforts that target growing producer demand.

The 350-mile pipeline originates in the Denver-Julesburg (DJ) Basin in Colorado and terminates near the Conway hub in Bushton, KS. DCP Midstream LLC (DCP Midstream), owner of the partnership’s general partner, uses the pipeline as a market outlet for NGL production from plants in the DJ Basin.

DCP Midstream said it is investing to accommodate growing demand from producers for gas gathering and processing capacity, including a new processing plant at its Mewbourn facility in Gilcrest, CO, and a new large-diameter gathering pipeline. DCP Midstream said it anticipates completing its Mewbourn expansion by early 2011. “We believe the acquisition of the NGL pipeline by the partnership will benefit our customers by maintaining a critical outlet for increased NGL production in the DJ Basin,” said DCP Midstream CEO Tom O’Connor.

DCP Midstream, a Denver-based joint venture of Spectra Energy Inc. and ConocoPhillips, said it expects to spend approximately $18 million in expansion capital to connect and integrate the acquired pipeline with its facilities, with cash flow contributions commencing in early 2011. DCP Midstream and the partnership have agreed to a 10-year transportation agreement.

“Given the pipeline’s proximity to DCP Midstream’s existing gathering and processing facilities, this acquisition and subsequent capital projects represent a strategic investment for the DCP enterprise,” said partnership CEO Mark Borer. “The 100% fee-based earnings profile of this pipeline is an excellent fit within our asset portfolio.”

The acquisition was financed with borrowings under the partnership’s revolving credit facility.

“We are pleased to complete the disposition of the NGL pipeline system, which was placed for sale after completion of a strategic review of our portfolio of operating assets,” said Forrest E. Wylie, CEO of Buckeye’s general partner. “The proceeds from the sale will be used to reduce the balance outstanding on our revolving credit facility.”

©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.