Canadian Superior Inc. said it plans to buy Challenger Energy Corp. in a friendly transaction worth an estimated C$78 million (US$69 million) including debt. The merger would give back to Canadian Superior a stake in a promising Trinidad natural gas project that it has been developing for several years. Calgary-based Canadian Superior is undergoing a restructuring after filing for bankruptcy earlier this year (see NGI, May 4). Under the merger agreement, Canadian Superior plans to issue 0.51 share, or C$0.435, for each Challenger share. The transaction would include the assumption of Challenger's C$54 million in net debt. The transaction is part of a plan by Canadian Superior to restructure under Canada's Companies' Creditors Arrangement Act. As part of the restructuring process Canadian Superior agreed to sell to UK-based Centrica plc a 45% interest in Block 5(c) offshore Trinidad, for US$142.5 million in cash (see NGI, June 8). The block is operated by BG Group, which holds a 30% stake, and Challenger, which still has a 25% stake. The discovery, made in 2005, may hold up to 5 Tcf (see NGI, Aug. 18, 2008). The combined company would produce an estimated 3,050 boe/d, 85% weighted to natural gas.
Petroleos Mexicanos (Pemex) in July plans to offer private companies the opportunity to bid for rights to develop three small natural gas exploration blocks that could produce up to 100 MMcf/d. The blocks would be offered in an effort to expand international exploration in Mexico, said Carlos Morales, who heads Pemex's exploration and production division. Pemex, Mexico's nationally owned oil and gas company, uses multiple service contracts (MSC) to attract foreign investment in developing gas reserves. Pemex began offering 15- and 20-year MSCs in 2003 (see NGI, July 21, 2003). Under the MSCs, Mexico continues to own the leasehold while the contractor receives a fee for the works performed and services rendered. The contracts offered in July would use the same formula, and Pemex would hire the companies for gas exploration in specific areas, Morales said.
Midcontinent Express Pipeline LLC (MEP) asked FERC for the go-ahead to begin service at compressor and booster stations on a 507-mile pipeline that is slated for operation by Aug. 1. The pipeline, when operational, will provide more market access to shale gas producers in the South. MEP, a joint venture of Kinder Morgan Energy Partners LP and Energy Transfer Partners LLC, is seeking authorization from the Federal Energy Regulatory Commission (FERC) to begin service at the Perryville Compressor Station in Union Parish, LA, by July 1, and at the Delhi Booster Station in Richland Parish, LA, by July 15 [CP08-6]. It said it "has completed all tie-ins and hydrotesting for both stations." More than half of the $1.3 billion pipeline project -- from Bennington, OK, to Delhi -- is in interim service, said Kinder Morgan spokesman Joe Hollier. This leaves 207 miles of the line -- from Delhi to Alabama -- in various phases of construction. But "they're getting close to being done. We're getting there" and hope to be operational by Aug. 1, he said. The much-anticipated project is in response to robust natural gas production from various shales in Texas, Arkansas and Oklahoma. It will help move gas eastward to markets in Florida and the Northeast. The pipe project is also seen as a way to keep supply and markets connected should Gulf of Mexico production go off-line in the event of a hurricane.
Spokane, WA-based Avista Corp. and all other parties involved in the company's electric and natural gas rate filing in Idaho reached a settlement agreement that, if approved by the Idaho Public Utilities Commission (PUC), would result in no net rate increase for natural gas customers and less than 2% for residential electric customers, the company said. For natural gas service, rates would increase by 2.11%, but would be offset by an equivalent purchased gas adjustment decrease. The PUC had previously approved a 6.7% drop in retail natural gas rates for Avista's Idaho customers (see NGI, June 8). That decline was directly related to the continued decline in wholesale gas costs. It was the second time in six months the PUC lowered Avista's retail gas rates; in January gas rates were lowered 4.7%. Since last fall Avista has been steadily decreasing its retail natural gas rates in its headquarter state of Washington and Idaho. Avista has said in the two states collectively about 75% of the average residential gas utility bill is due to the cost of gas and pipeline transportation. The rest reflects Avista's fixed cost to provide natural gas service. The settlement agreement sets Avista's rate of return on rate base at 8.55%, with a common equity ratio of 50% and a 10.5% return on equity. The new rates would take effect Aug. 1. Lower natural gas prices were a major driver in the agreement, which includes a lower electric rate increase than Avista originally requested, the company said.
FERC has approved Kinder Morgan Louisiana Pipeline LLC's request to begin service on the bulk of a 135-mile, mostly 42-inch diameter pipeline that will carry regasified liquefied natural gas (LNG) from Cheniere LNG's 2.6 Bcf Sabine Pass import terminal in Cameron Parish, LA, to multiple pipelines. The pipeline subsidiary of Houston-based Kinder Morgan Energy Partners LP was clear to begin operating leg one of the facilities, which includes 132.2 miles of 42-inch diameter pipeline and associated facilities in Cameron, Calcasieu, Jefferson Davis and Acadia parishes; and a 2.3-mile, 24-inch diameter lateral connection with Florida Gas Transmission's (FGT) compressor station in Acadia Parish. This leg will have firm peak-day capacity of up to 2,130 MDth/d. The second leg of the $517 million project has not yet been authorized by the Federal Energy Regulatory Commission for service. It consists of a one-mile, 36-inch diameter pipe that will extend from the Sabine Pass terminal to a point of interconnection with affiliate Natural Gas Pipeline Company of America (NGPL) located north of the terminal. It would have a firm peak-day capacity of up to 1,265 MDth/d, and would include 200,000 Dth/d of capacity that NGPL will lease to Kinder Morgan Louisiana on a long-term, firm basis in southwest Louisiana. The entire capacity of the Kinder Morgan Louisiana pipeline has been awarded to Total Gas & Power North America Inc. and Chevron U.S.A. Inc., which have signed precedent agreements, according to Kinder Morgan.
FERC issued a certificate to Atmos Pipeline and Storage LLC to build a 25 Bcf storage project near Fort Necessity in Franklin Parish in northeastern Louisiana. The Fort Necessity Gas Storage Project calls for the construction of three underground salt dome caverns in the Fort Necessity salt dome formation, approximately 12 miles south-southwest of Winnsboro, LA. The three natural gas storage caverns would have total capacity of nearly 24.75 Bcf, of which 15 Bcf would be working gas capacity [CP09-22]. The facility would have an average injection rate of 375 MMcf/d and a maximum injection rate of approximately 500 MMcf/d, while the average withdrawal rate would be 750 MMcf/d and maximum withdrawal rate would be approximately 1.5 Bcf/d, according to Atmos Pipeline, a subsidiary of Dallas, TX-based Atmos Energy Corp. It would tie in with four pipelines: Tennessee Gas Pipeline, Columbia Gulf Transmission, ANR Pipeline and Regency Energy Partners LP. Atmos Pipeline proposes to build the project in two phases over a five-year period, with the first two caverns going into service by December 2011 and the last cavern becoming operational by August 2013. Noting its lack of market power in the region, the Federal Energy Regulatory Commission (FERC) granted Atmos Pipeline's request to charge market-based rates for firm and interruptible storage, hub and wheeling services.
The Federal Energy Regulatory Commission approved UGI LNG Inc.'s application to build and operate an additional liquefied natural gas (LNG) storage tank at its Temple LNG facility in Berks County in western Pennsylvania. UGI LNG, a subsidiary of Wyomissing, PA-based energy marketer UGI Energy Services Inc., proposes to construct a new storage tank with 1,000 MMcf of working gas capacity and a 150,000 Dth/d vaporization and sendout system along with associated boil-off handing equipment. Once finished, the Temple facility, which UGI LNG and affiliates have owned and operated since 1971, will have a maximum LNG storage capacity of 1,250 MMcfe and a maximum liquefaction and delivery rate of 205,200 Dth/d [CP08-4580]. The Temple facility receives gas for liquefaction and storage at Texas Eastern Transmission's Temple delivery meter and delivers all of its regasified LNG into the distribution system of affiliate UGI Utilities. The company said it has received nonbinding bids for firm capacity from six companies for more than the capacity proposed for the new storage tank, which it expects to be operational in April 2012. FERC approved UGI LNG's request to continue to charge market-based rates for all firm and interruptible storage, liquefaction and vaporization services.
Natural gas utility company Energy West Inc. has taken steps to put a wedge between Florida Public Utilities Co. (FPU) and a subsidiary of Chesapeake Utilities Corp. (CPK), which seek to merge, by demanding that FPU turn over a list of its shareholders to Energy West, a minority holder of the outstanding shares of FPU. In a filing with the Securities and Exchange Commission (SEC), Energy West CEO Richard M. Osborne "demand[ed] a copy of the list of shareholders of FPU pursuant to the Florida Business Corporation Act," which requires FPU or its agent to maintain a record of its shareholders in alphabetical order by class of shares, revealing the number and shares held by each. "Energy West is entitled to such a list. Energy West wishes to examine the list for the purpose of communicating with FPU shareholders regarding the affairs of FPU, including the upcoming special meeting of shareholders related to the proposed merger with Chesapeake Utilities Corp.," Osborne told the SEC. Montana-based Energy West, which serves approximately 36,000 natural gas customers in Montana, Wyoming, Maine and North Carolina, reported that it owns 394,522 shares of common stock at $1.50/share in FPU. CPK and FPU announced the proposed merger in April, a move that would create a $595 million combined energy company serving 200,000 customers in three states.
SCANA Corp. principal subsidiary South Carolina Electric & Gas Co. (SCE&G) has filed with the Public Service Commission of South Carolina (PSC) for a 2.53% overall increase in its retail natural gas base rates. If approved, the $13.4 million rate increase would provide for a 5.66% increase in residential customer rates, a 2.53% hike for small/medium commercial customers and a 1.84% hike for large commercial/industrial customers. SCE&G serves 309,000 customers in South Carolina. Because the wholesale cost of gas has declined significantly over the past 12 months, residential customers would still pay an average of 67 cents less each month, SCE&G said. The rate filing was driven primarily by increased costs associated with building, operating and maintaining SCE&G's system infrastructure. SCE&G is filing for the adjustment under terms of the state's Natural Gas Rate Stabilization Act. The statute, which took effect in 2005, is designed to reduce customer rate volatility by allowing regulated utilities to recover the costs they incur to expand, improve and maintain infrastructure. The law also works to reduce customer rates when increased revenues cause a utility's earnings to exceed the return on equity range authorized by the PSC, SCE&G stated. If approved, the rate adjustment likely would take effect with the first billing cycle of November, according to SCE&G.
Having launched a nonbinding open season in early June, the backers of the proposed Tricor Ten Section Hub LLC underground natural gas storage project in California filed an application with FERC seeking a certificate for their project by February. They seek to operate a high-deliverability, multi-cycle storage facility in Kern County, 10 miles southwest of Bakersfield. Tricor launched its open season June 1, running through Sept. 30 and targeting a 2012 commercial start for the facility. Depending on the results from the open season, Tricor said it could consider offering storage service to intrastate pipeline customers, too, by connecting its facility to the Pacific Gas and Electric Co. (PG&E) and Southern California Gas Co. (SoCalGas) transmission systems. In its application, Tricor said its facility initially would interconnect with the jointly owned Kern River/Mojave interstate pipeline. It notes the longer-term potential for connecting with PG&E and SoCalGas pipelines. Ultimately, the storage project could have what Tricor estimates to be a 4 Bcf "combined lateral surrounding optionality" at its storage hub.
Xcel Energy asked regulators in Colorado to let it lower its natural gas rates to reflect a 24% drop in wholesale commodity costs in July for its residential and small business utility customers. Bills for the month should be down by 12% and 24% for residential and small business customers, respectively. Bills on average this July will be 29% lower than they were on average in the same month last year. Xcel said the commodity price proposed to the Colorado Public Utilities Commission (PUC) is going to drop to 3.068 cents/therm from the current price of 4.011 cents/therm. "Typical residential customers are expected to decrease use by 10% in July, compared to their use this month," the spokesperson said. "Overall bills would decrease to $18.70 for 16 therms; they were $21.26 for 17.8 therms this month."
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