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Enterprise to Process EnCana's Piceance Gas, Purchase TEPPCO's Jonah Gas Rights

An affiliate of Enterprise Products Partners LP last week entered into a long-term contract to process up to 1.3 Bcf/d of EnCana Oil and Gas (USA) Inc.'s Piceance Basin gas production. In addition, Enterprise signed a letter of intent Thursday to buy TEPPCO's ownership interests in the Pioneer silica gel gas processing plant in Opal, WY, giving Enterprise the plant and all of Jonah Gas Gathering Co.'s rights to process gas originating from the Jonah and Pinedale fields.

The contract with EnCana "enables Enterprise to extend our natural gas processing business to the Rocky Mountains, one of the fastest-growing natural gas producing regions in the United States," said CEO Robert G. Phillips. "Natural gas production in the Piceance Basin has been increasing at a 20% compound annual growth rate over the past four years and is a primary driver of the new processing facilities and the downstream expansion of Enterprise's pipeline and fractionation assets serving this region."

Enterprise is currently constructing the Meeker cryogenic plant and associated facilities in Rio Blanco County, CO, at the terminus of EnCana's Piceance Basin gas gathering system and the beginning of the Entrega Gas Pipeline system. Entrega was given the green light by FERC Wednesday to begin transporting gas to the Wamsutter Hub in Wyoming.

The Meeker facilities, which are expected to begin operations in mid-2007, will be capable of processing up to 750 MMcf/d. Initially, the Meeker facility will be baseloaded with EnCana's existing gas production, which is currently 360 MMcf/d (gross). Gas processed by the plant will be delivered through four major current and planned gas pipelines including Entrega, Wyoming Interstate, TransColorado and Questar.

The Meeker plant will have the ability to recover a minimum of 2,500 bbl/d and a maximum of 35,000 bbl/d of mixed natural gas liquids (NGL), depending upon processing conditions and gas quality. A second phase of the project would include expansion of the plant to process up to 1.3 Bcf/d with total design recovery of 70,000 bbl/d of NGL.

In addition to the plant and related equipment, Enterprise plans to construct a 50-mile 12-inch diameter NGL pipeline lateral to interconnect the plant with its Mid-America Pipeline (MAPL) system, which transports NGL from the Rocky Mountain region to markets located near Mont Belvieu, TX and Conway, KS. Enterprise previously announced a 50,000 bbl/d Phase I expansion of the MAPL system in January 2005, and it expects to place the new capacity in service in 2Q2007. Additionally last July, Enterprise announced a new 75,000 bbl/d NGL fractionator, which is currently under construction near Hobbs, NM, which will be supplied, in part, by the NGL produced at the Meeker plant.

Phillips said Enterprise also was looking forward to working with TEPPCO to reach a definitive agreement on the Pioneer plant. "This is an attractive opportunity for us to extend our natural gas processing franchise into the prolific Jonah and Pinedale fields, one of the fastest growing natural gas producing regions in North America." No financial details were released.

Subject to final agreements and regulatory approvals, Enterprise plans to purchase the Pioneer plant and immediately begin construction to expand the capacity of the facility from 275 MMcf/d to 550 MMcf/d. The expansion is expected to become operational in mid-2006. Enterprise would also build a 650 MMcf/d cryogenic gas processing plant adjacent to the Pioneer silica gel plant. When operating at full capacity, the Pioneer cryogenic plant would have the ability to recover a minimum of 2,500 bbl/d and a maximum of 30,000 bbl/d of mixed NGL, with service expected by the end of 3Q2007. The Pioneer expansion and the new cryogenic plant would serve the growing natural gas production in the prolific Jonah and Pinedale fields.

"Natural gas processing is not a core business for TEPPCO, and this facility is not integral to our midstream segment operations," said TEPPCO's acting CEO Lee W. Marshall Sr. "More importantly, we believe that Enterprise's investment in, and development of the Pioneer cryogenic plant will be a long-term benefit for our Jonah Gas Gathering system. The sale of the Pioneer plant would also enable us to redeploy the proceeds in our growth projects, to retire debt or for other partnership purposes."

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