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BP Amoco Buying Another Third of Destin

BP Amoco Buying Another Third of Destin

BP Amoco grew its share of the Destin Pipeline from one-third to two-thirds by acquiring the one-third share of Southern Natural Gas Co. Tejas Destin LLC holds the remainder.

Destin is a 255-mile offshore and onshore gathering and distribution system that serves gas producers in the eastern Gulf of Mexico, connects to the Pascagoula Gas Processing plant, and delivers gas to markets through five interstate lines. Sonat will continue to operate the pipeline until the transaction is complete. BP Amoco and Tejas have yet to determine which will operate the system after that, said Peter Keith, BP Amoco Pipelines director of business development.

"Generally speaking, we see the eastern Gulf of Mexico to be a robust corridor for future gas production, and this will be a key infrastructure element to move that gas to market," Keith said of the company's decision to buy another third of Destin.

Current Destin throughput is about 600 MMcf/d, which is expected to grow to the nameplate capacity of 1 Bcf/d in the next several years. Keith said there are a number of prospects in the area that could contribute to throughput, and the company is negotiating with some of the producers. He also said an additional Destin tie-in was in the works but declined to give details.

El Paso Energy Corp. agreed late last year to sell Sonat Inc.'s interest in Destin along with East Tennessee Natural Gas and the Sea Robin Pipeline to gain Federal Trade Commission (FTC) approval of its merger with Sonat (see NGI Oct. 4). The FTC believed Sonat's interest in Destin, when joined with El Paso's control of the Viosca Knoll Gathering System, could lead to a monopoly-type situation in the offshore Mississippi and Louisiana areas. BP Amoco had right of first refusal to acquire the additional share.

"The Destin Pipeline is an important link in the value chain between our significant Gulf of Mexico discoveries and the new, highly efficient Pascagoula Gas Processing plant," said Tim S. Hawkins, BP Amoco pipeline business development manager. "Both the Destin Pipeline and the gas plant were built to accommodate expansion, reflecting the increased development activity throughout the region."

Keith said Destin throughput is on schedule with initial expectations for the project. He conceded the eastern Gulf pipeline infrastructure has turned out to be stronger than what was predicted back in 1996 when Destin was being proposed. Production levels have been equal to expectations. Some prospects haven't panned out, but others have taken their place, he said. "The corridor is as robust as we thought it was going to be."

Formed as Destin Pipeline, LLC, the original owners were affiliates of BP Amoco, Sonat Inc. and Shell Oil Co. Construction of the $460 million pipeline and Pascagoula Gas Plant project began in December 1997 with initial start up in September1998. In late 1998, a 45-mile extension added a 24-inch diameter pipeline connecting Destin's 36-inch mainline hub platform at Main Pass Block 260 to Chevron's facility at Viosca Knoll Block 900.

Destin, which went into service in 1998, has a 121-mile offshore segment and a 134-mile onshore segment. The 36-inch offshore mainline runs 76 miles from Main Pass Block 260 to the Pascagoula Gas Plant. BP Amoco operates the plant and holds a 60% interest, and Enterprise Products Partners LP of Houston holds the remaining 40% interest. Destin's onshore portion interconnects with five pipelines to deliver gas to markets served by the Koch Gateway, Florida Gas, Transcontinental Gas, Tennessee Gas, and Southern Natural Gas pipelines.

Joe Fisher, Houston

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