Williams 'Vaults' into Canadian Midstream
The Williams Companies Inc. made clear its plans to be a serious
contender in the Canadian midstream market with an announcement
last week that it has reached an agreement to buy most of
TransCanada PipeLines Ltd.'s remaining ownership interests in
natural gas liquids (NGL) and extraction facilities and one
processing plant, as well as a one-third interest in a key
Alberta-to-U.S. gas liquids pipeline from Dow Chemical Co.
"We have been wading into the Canadian market for some time,"
but the agreements with TransCanada and Dow Chemical "allow us to
dive in," said Williams spokesman Kelly Swan. He would not disclose
how much Williams Energy Canada Inc., a Williams unit, agreed to
pay for the midstream and NGL pipeline assets, but he did say it
was "several hundred million." The sale of TransCanada's assets is
expected to close in the fourth quarter, while the purchase of
Dow's interest in the NGL pipeline is targeted for completion by
the end of the third quarter, according to Williams.
"This is a key milestone in the life of Williams' midstream
business for three reasons. First, it vaults us into Canada for the
first time in a prominent way with assets that are located on the
doorstep of the Western Canadian Sedimentary Basin, which is a
growth basin that has tremendous upside potential. Second, the
acquisition reinforces Williams' role as a leading NGL producer in
North America. Third, the purchase builds upon our acquisition of
MAPCO in 1998 when we added around 10,000 miles of NGL pipes to our
gathering and processing operations," said Steve Malcolm, president
of Williams' Energy Services business, which oversees the company's
The Williams-TransCanada deal was only one of several new
transactions the Canadian pipeline announced it has negotiated with
companies to sell off the bulk of its remaining gas liquids and
extraction, and gathering and processing assets in western Canada.
Most of the asset sales (excluding Williams and two others) are
expected to be completed next month, TransCanada said. All of the
sales will net TransCanada $1.15 billion.
Included in the $1.15 billion amount were TransCanada's sales of
its ownership interests in its East Crossfield gas plant in Calgary
to Mobil Oil Canada Ltd., and in its Mosquito Creek, Parkland and
Vulcan gas processing facilities in Alberta to AltaGas Service Inc.
These transactions closed last month.
Based on prior sales and the new sale agreements, Calgary-based
TransCanada estimated that it has achieved about 80% of its
intended goal to divest $3 billion of non-core assets. That
translates to about $2.4 billion in asset sales since it began its
divestiture program last December.
With the purchase of TransCanada's midstream assets, Williams
will add to its existing portfolio about 6 Bcf/d of gas processing
capacity, 225,000 barrels/day of NGL production capacity, 2,000
miles of NGL transportation pipeline and more than five million b/d
of NGL storage capacity in western Canada.
Specifically, it has agreed to buy TransCanada's interests in
six facilities - the Cochrane plant in Alberta, with 2.5 Bcf/d of
processing capacity; the Redwater fractionation and NGL storage
facility in Alberta, with 65,000 b/d of liquids capacity; Empress
II plant in Alberta, with gas processing capability in excess of
2.5 Bcf/d; Empress V plant in Alberta, which is currently under
construction; the Younger NGL extraction plant in British Columbia,
with gas processing capacity of 750 MMcf/d and liquids production
capacity of 32,000 b/d; and the West Stoddart processing plant in
British Columbia, with capacity of 120 MMcf/d.
Williams purchased TransCanada's 100% ownership interests in the
Cochrane, Redwater, Empress II and West Stoddart facilities; its
50% interest in the Empress V plant, and its 43.3% interest in the
Separately, the Tulsa, OK-company has agreed to buy Dow
Chemical's 32.5% interest in the Cochin pipeline, a 1,900-mile,
12-inch diameter pipeline that transports NGLs and ethylene from
Alberta to destinations in the Upper U.S. Midwest and on to
Windsor, ON, with an extension to Sarnia, ON.
The addition of the Cochin pipeline is a "key link" in Williams'
strategy to develop a comprehensive transportation, storage and
distribution network to every major NGL market in North America,
said Steve Springer, Williams' vice president and general manager
of midstream operations. Armed with the Dow and TransCanada
purchases, Williams is making a "firm commitment to being involved
in western Canada because of the growth projections for gas and
liquids production," he noted.
Aside from its deals with Williams, Mobil and AltaGas,
TransCanada has entered into agreements with other purchasers to
sell its: 100% interest in its Zama-area sour gas processing plant
and associated gathering system in Alberta; 100% interest in its
Central Foothills gas gathering system in Alberta; 100% interest in
its Columbia-Minehead gathering system in Alberta; about 98%
interest in its Cutbank sweet gas processing plant and associated
gathering system; and 52% interest in its Clear Hills sour gas
processing plant and associated gathering network. TransCanada
would not disclose the identities of the parties with whom it has
reached agreements, saying they would be revealed when the sales
close, which is expected to occur in late September.
TransCanada said some of the midstream assets still to be sold
include: Cancarb Ltd. (a thermal carbon black manufacturing
business) and its Alberta-to-Illinois Express oil pipeline. Also it
wants to shed a number of non-core international assets: a gas
pipeline system, gas treatment plant and offshore gas producing
licenses in the Netherlands; a gas pipeline in Colombia; Accroven
gas liquids extraction facility in Venezuela; GasPacifico gas
pipeline from Argentina to Chile: and a gas pipeline in Mexico. It
noted it hopes to sell most of these assets by the end of the year.