Enterprise, Shell Grab Pipe Spinoffs

Enterprise Products Partners L.P. reported early last week that its operating subsidiary has acquired ownership interests in five natural gas pipeline systems and related assets in the central Gulf of Mexico from El Paso Energy Partners, L.P. for $112 million in cash. The El Paso unit was forced to sell the assets as part of the Federal Trade Commission's approval of the El Paso Energy/Coastal Corp. merger, which was completed last Monday.

The five systems have 725 miles of pipeline with a combined capacity of 2.85 Bcf/d of gas. Included in the purchase, Enterprise received Sailfish Pipeline L.L.C. and Moray Pipeline L.L.C. Sailfish owns a 25.67% interest in the Manta Ray Offshore Gathering Co., L.L.C. as well as the Nautilus Pipeline Co. L.L.C. Moray owns a 33.92% interest in Nemo Gathering Co. L.L.C.

Both the Manta Ray and Nautilus Pipeline systems are jointly owned with Shell Gas Transmission (SGT) and Marathon Gas Transmission. Manta Ray is comprised of 225 miles of unregulated natural gas pipelines with a capacity of 750 MMcf/d, while Nautilus is a 101-mile regulated line with a capacity of 600 MMcf/d. The Nemo joint project with SGT is a 24-mile gas pipeline, which connects Shell's Brutus and Glider deepwater projects to the Manta Ray gathering system. Nemo is expected to be complete during the fourth quarter 2001.

"This transaction significantly expands our natural gas pipeline base of assets to include some of the most attractive pipelines in the central Gulf and integrates well with our onshore natural gas liquid system and the Acadian Gas system," stated O.S. "Dub" Andras, CEO of Enterprise.

"These pipeline systems are each strategically located in the Gulf to link many of the new, highly prolific deepwater developments to a number of onshore interstate and intrastate pipeline systems that serve multiple end use markets throughout the United States."

Enterprise and SGT also teamed up to form Starfish Pipeline Co. L.L.C., which acquired Stingray Pipeline Co. L.L.C. and West Cameron dehydration Co., L.L.C. from an affiliate of El Paso Energy Partners. The ownership of Starfish is 50-50, but SGT will serve as the operator and commercial manager of the assets. Stingray is a 325-mile pipeline that transports natural gas and injected condensate from about 53 fields in the High Island, West Cameron, East Cameron, Vermilion and Garden Banks areas to onshore interstate and intrastate pipelines in Cameron Parish, LA.

Shell Gas Transmission said the addition of the Stingray pipeline, with a capacity of 1.2 Bcf/d, will boost the pipeline capacity under its commercial management to about 7.1 Bcf/d.

"Purchase of the Stingray pipeline and its related onshore dehydration facility supports our strategy to be positioned to provide the necessary pipeline infrastructure to support increased Gulf of Mexico deepwater natural gas production," said Doug Krenz, president of SGT. "Shell Gas Transmission is well positioned to provide natural gas transport services to producers in all major Gulf of Mexico production areas, particularly the highly prolific deepwater areas."

The West Cameron dehydration facility has a capacity of 950 MMcf/d and is located at an onshore terminus of Stingray. Also included in the transaction are 17 laterals spanning approximately 53 miles that are attached to Stingray, which are in the process of being acquired from Natural Gas Pipeline Company of America.

Alex Steis

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