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Leviathan Becomes an El Paso GOM Gatherer

Leviathan Becomes an El Paso GOM Gatherer

Attempting to consolidate its offshore pipeline assets under one company, El Paso Energy Corp.'s El Paso Field Services sold its interest in an offshore gathering system to Leviathan Gas Pipeline Partners L.P. for $85.26 million in cash and stock exchanges. El Paso will receive $63.945 million in Leviathan stock, improving its holding interest in the company from 27.3% to 34%. The sale of the Viosca Knoll Gathering Co. (VKGC) still needs to be approved by Leviathan's board of directors. El Paso said the deal will be ratified by March 31 and that no employees will be affected.

The increase in stock ownership signals El Paso's dedication to Leviathan as its main deep-water Gulf development arm. "Leviathan Gas will be the vehicle for all of El Paso's future offshore developments," said El Paso Field Services President Bob Philips.

Paula Delaney, an El Paso spokeswoman, said Leviathan is a significant part of El Paso's offshore Gulf strategy. "We want to umbrella as much under Leviathan as we can," she said. "They have the expertise to continue our position as the top gatherer in the Gulf of Mexico. One reason we want to retain this position is because then we can continue to fill our own onshore pipes with our own offshore gas."

The 125-mile, 20-inch pipeline system serves the Main Pass, Mississippi Canyon, and Viosca Knoll areas southeast of New Orleans. It has facilities that generate 7,000 hp of compression and is capable of delivering 1 Bcf/d to the Tennessee Gas, Columbia Gulf Transmission, Southern Natural, Transcontinental, and Destin pipelines.

This transaction marks the second relocation of El Paso assets to Leviathan's control. In late October, the gathering company acquired 100% interest in the Sunday Silence field in the Ewing Bank area of the Gulf. El Paso relocated control of this field, which produces 5.4 MMcf/d, to Leviathan after acquiring the asset when it bought Deeptech International in March for $450 million. "That was the first time El Paso put an asset under Leviathan's control, and now it is becoming corporate strategy," Delaney said.

Leviathan Gas is one of the largest independent gatherers of natural gas in the Gulf. It transports more than 3 Bcf/d. Besides the Viosca and Sunday Silence assets, it also holds interest in seven gas pipeline systems and five offshore leases.

John Norris

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