Tejas, Enterprise Eye Expanding NGL Lines

Depressed gas liquids prices don't affect the need for additional liquids transportation capacity in the Gulf of Mexico region in the view of two companies that last week joined to expand Louisiana pipeline facilities.

Shell Oil affiliate Tejas Natural Gas Liquids LLC and Enterprise Products Partners L.P. formed joint venture Entell NGL Services LLC to develop a gas liquids transportation and distribution system. Entell's initial asset base will include substantially all of Enterprise's existing pipeline facilities in Louisiana. In addition, Entell will create a pipeline system linking storage at Breaux Bridge, LA, to Mont Belvieu, TX. Entell anticipates the system being capable of distributing products from key NGL sources in southern Louisiana directly to major NGL markets, including the lower Mississippi River corridor, Dixie pipeline, Lake Charles, LA, and Mont Belvieu.

Entell is a limited liability company in which Enterprise and Tejas each have a 50% interest. Entell owns 250 miles of pipe connecting several market centers in Louisiana, with the capacity to move 80,000 barrels/d. Planned expansions will boost that number to more than 110,000 barrels/d.

"The synergies that Tejas' growing NGL production and Enterprise's asset base bring to Entell support Tejas' desire to grow its downstream NGL storage and distribution systems both within the Louisiana market and through linkage to Mont Belvieu," said Curtis Frasier, executive vice president of Tejas Energy.

"Enterprise has been a natural gas liquids fractionation, storage and pipeline service provider in southern Louisiana and Mont Belvieu, TX, for more than 25 years," said O.S. Andras, Enterprise president. "Combining our Louisiana pipeline system with Tejas through Entell creates a link between these two major market areas."

Mike Falco, senior vice president of business management for Enterprise, said Tejas has been one of the biggest shippers on its system and predicted with all the development in the Gulf of Mexico growth on the system will be "significant." Backing from Tejas makes building/buying a line back to Mont Belvieu more of a reality. Falco said Entell hopes to accomplish that by the end of the year.

Falco said there are no current plans for similar ventures. "This is the biggie. We've been working on this for the better part of the year. This is the alliance that we've chosen and that we think will work for us."

Tejas Natural Gas Liquids LLC is responsible for processing and marketing gas liquids from Shell's Gulf of Mexico production. The company ranks as the largest NGL producer in South Louisiana. Facilities operated by Enterprise at Mont Belvieu include one of the largest NGL fractionation and MTBE production facilities and the largest butane isomerization complex in the United States and two propylene fractionation units.

The company also owns and operates a network of about 500 miles of pipeline throughout the Gulf Coast and a fractionation facility in Petal, MS, with capacity of 7,000 barrels per day. The partnership leases and operates one of only two commercial NGL import-export terminals on the Gulf Coast and NGL storage wells with about 35 million barrels of capacity.

Last month Royal/Dutch Shell Group said it plans to sell 40% of its chemicals business and take a related fourth quarter $4.5 billion after-tax charge as part of a major restructuring. Other assets to be sold include Transok, the 6,500-mile Oklahoma intrastate gas transmission and gathering system that Shell subsidiary Tejas Gas bought in May 1996. Tejas paid $890 million for Transok, which makes it one of the largest midstream transactions ever completed. In a statement issued by Tejas last month, the company said it would "immediately initiate a competitive sales process, with an anticipated closing of the transaction in the first half of 1999."

Tejas said the sale is "consistent with the recognition that the long-term success of our midstream business is dependent on capturing the key synergies between Tejas, Coral and Shell's producing assets. We view our Gulf Coast transportation, storage and NGL operations as the assets best aligned to complement Coral's industrial marketing activities and the growth of our power generation business. The sale of Transok will enhance our capital resources and our capability to concentrate on these synergies."

Joe Fisher, Houston

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