Williams Partners and Williams said Monday the partnership plans to acquire Williams' 83.3% interest in an olefins production facility in Geismar, LA. The partnership also would become the operator of the plant.
Williams Partners said the addition of olefins production to its business would be accretive to distributable cash flow on a per-unit basis. Williams Partners would fund the transaction largely with the issuance of limited-partner units to Williams.
The Geismar facility south of Baton Rouge, LA, is a light-end natural gas liquid (NGL) cracker with current volumes of 37,000 b/d of ethane and 3,000 b/d of propane and annual production of 1.35 billion pounds of ethylene. With the benefit of a $350-400 million expansion under way and scheduled for completion by late 2013, the facility's annual ethylene production capacity will grow by 600 million pounds to 1.95 billion pounds. The Geismar facility also produces propylene, butadiene and debutanized aromatic concentrate.
The partnership said it expects the addition of olefins production to its business would bring more certainty to cash flows that today are exposed to the market for ethane, which is projected to experience periods of volatility as demand infrastructure lags new supplies from shale gas production. Ethylene demand is expected to remain as strong as ethylene and is expected to be less expensive than crude oil-based feedstock.
"Adding the Geismar olefins production facilities to Williams Partners' portfolio would immediately reduce the partnership's exposure to the ethane market by nearly 70%, and it would nearly eliminate it by 2014," said Alan Armstrong, CEO of the general partner of Williams Partners. "The business is highly desirable because it would create greater consistency in our earnings and cash flows."
Williams owns 68% of Williams Partners, including the general partner interest.
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