Conoco Inc.’s Canadian midstream arm, Conoco Canada Limited,said last week it has acquired the bulk of Petro-Canada’s naturalgas liquids (NGL) business, including the fifth largest natural gasprocessing plant in North America, for an undisclosed sum. Closingon the purchase is scheduled to be completed in the second quarterof 2000.

“This addition to our portfolio increases Conoco’s total netnatural gas liquids production in Canada, the U.S. and Trinidad by65%, to 105 million b/d, and triples net processing capacity to 3.4Bcf/d, while reducing per barrel overhead and operating costs by24%,” said Mike L. Johnson, vice president and general manager ofConoco’s natural gas and gas products business unit.

Through the deal, Conoco acquired 92% operating interest inPetro-Canada’s 2.4 Bcf/d Empress natural gas processing plant nearMedicine Hat, AB, the 580-mile Petroleum Transmission Company (PTC)pipeline that extends from Empress to Winnipeg, six relatedpipeline terminals and a storage facility. The Empress plant has anNGL production capacity of 48,000 b/d.

Johnson said the Petro-Canada acquisition is Conoco’s latesteffort to move away from a midstream business of scattered assetsin mature basins towards a more profitable business built oncentralized, large-scale gas processing systems.

In addition to acquiring the assets, Conoco will operate andmanage Petro-Canada’s NGL wholesale supply and marketingoperations, and employ almost all of the 140 Petro-CanadaNGL-related employees in Calgary, the Empress plant, PTC pipelinesystem and field offices in Tulsa and Sarnia, ON.

The acquisition includes major agreements for Conoco to provideall NGL services for Petro-Canada’s upstream operations in WesternCanada and for Petro-Canada’s refineries in Edmonton, AB, Oakville,ON and Montreal, PQ.

“This acquisition is a large step in our program to economicallyupgrade our portfolio of North American natural gas processing andnatural gas liquids assets, and follows the recently announced saleof midstream properties in Oklahoma and West Texas,” said RobMcKee, Conoco’s executive vice president for global explorationproduction. “The Petro-Canada acquisition augments our existingCanadian assets that were recently expanded through an acquisitionof natural gas producing properties from Renaissance.”

A rigorous rationalization program of gas gathering and processing assets during the year resulted in the asset sales in Oklahoma. Conoco sold the assets to Duke Energy last January (see NGI, Jan. 10). The Renaissance Energy assets, purchased in late 1999, more than doubled Conoco Canada’s gas reserves and increased daily gas production by 60%.

For Petro-Canada, the transaction will result in an after-taxgain of $95 million, most of which will be included in earnings forthe first quarter. The gain is subject to adjustments the companysaid. “This asset sale continues our program of divesting non-coreassets,” said Ron Brenneman, president of Petro-Canada. “In theupstream, we are continuing to narrow the focus of our corebusinesses to Grand Banks offshore oil development, oil sands andnatural gas in western Canada.”

The Petro-Canada agreement also includes Conoco’s purchase ofPetro-Canada’s non-operating fractional interests in the CochinPipeline and its associated storage, treating plants and terminals;the Dow-operated Fort Saskatchewan propane-plus fractionator; andthe Rimbey Pipeline. Those interests are subject to othercompanies’ rights-of-first-refusal.

Joe Fisher, Houston

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