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
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.
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