The European Commission has approved Chevron Corp.'s purchase of Texaco Inc., clearing one hurdle on its road toward a successful merger by possibly this summer. Still to come is the lengthy U.S. approval process, including approval by the U.S. Federal Trade Commission. In a statement, the European Commission said that "the number of areas where the companies' activities overlap in Europe is limited and where they do (overlap), the combined market shares remain below 15%." Chevron has sold most of its European operations: some in 1984 to Texaco, another group to Royal Dutch/Shell Group in 1997 and some to Petroplus in 1998. San Francisco-based Chevron agreed to buy Texaco, based in White Plains, NY, last October for $35.1 billion in stock and assumed debt of $7.5 billion (see NGI, Oct. 23, 2000).
In his blueprint for the federal budget, President Bush this week set in motion plans to possibly begin oil and gas leasing in the coastal region of the Arctic National Wildlife Refuge (ANWR) by 2004. It authorizes the Interior Department to begin a study of the environmental impact of drilling in the Arctic region, and to have it completed by 2004. The final decision on whether to open up the coastal region to drilling will rest with Congress. The Bureau of Land Management and several cooperating agencies, such as the Fish and Wildlife Service, will conduct the environmental review, a department aide said.
Responding to a counteroffer this week by a consortium to purchase the energy assets of Fletcher Challenge Ltd., Shell Overseas Holdings Ltd. and Apache Corp. have made a final offer, raising their bid 4.4%, which increases the cash portion to US$3.55 per share from $3.34 per share. In response, New Zealand-based Fletcher's board of directors said it would recommend that shareholders approve the Shell-Apache offer at next Tuesday's special shareholder meeting. The latest offer came after Peak Petroleum, a consortium led by Guinness Peat Group Plc, said it would offer $3.70 a share and asked for a court-ordered delay to make a formal bid. In the deal, Houston-based Apache would pick up Fletcher's Canadian and Argentina natural gas assets. Even though the Shell-Apache offer is less than Peak's offer, Fletcher CEO Mike Andrews said that there was a "reasonably high risk" that Peak could not deliver on its proposal.
Westmoreland Power, subsidiary of Westmoreland Coal Co., has submitted a proposal to the North Dakota Industrial Commission to develop, own and operate, either independently or in partnership, a new state-of-the-art 500 MW lignite-fired power plant near Gascoyne, ND in connection with Lignite Vision 21. LV-21 is a partnership between the State of North Dakota and the Lignite Energy Council designed to encourage construction of a new baseload power plant. It includes up to $10 million in matching funds for such development. Westmoreland Coal is acquiring the coal operations of Knife River Corp., including active coal mines in North Dakota and Montana, and rights to develop the Gascoyne coal reserves.
To strengthen its capital structure before an anticipated spin off this year, Tulsa-based Williams Communications exchanged assets for shares of stock with its parent company Williams. In the agreement, Williams received 24.3 million common shares of Williams Communications, bringing its total ownership to 420 million shares, or 86% of the outstanding stock. In return for equity, Williams Communications will purchase its outstanding promissory note from Williams and acquire the 15-story, 750,000-square-foot Williams Technology Center, scheduled for completion this summer adjacent to Williams' headquarters in Tulsa.
IntercontinentalExchange said it set new single day trading records Tuesday in global oil and U.S. power. Oil derivative trading volumes totaled 19 million barrels including 13 million barrels of crude, 3 million barrels of gasoil, and 1 million barrels each of jet fuel and gasoline. Power trading reached 3 million MWh. The energy and metals exchange was launched by a consortium of companies last October. To date, more than 500 million barrels oil derivatives and 100 million MWh of power have been traded. Natural gas and power products include physically-delivered gas at fixed and indexed prices, natural gas basis and swing swaps and firm power. ICE also trades precious metals, including gold and silver spot, forwards, and options.
AltaGas Services Inc. said it is investing $10.4 million to expand three gas gathering and processing systems. The company is increasing its processing capability in its Thornbury area in northeastern Alberta to accommodate up to 9 MMcf/d) of production from 15 new gas wells. The expansion currently under construction will include a 7 MMcf/d natural gas processing plant and 25 miles of gathering pipelines. It also is building an 11 mile pipeline to connect 3 MMcf/d of gas located southeast of Alsask, SK, to its Acadia Valley gathering system in Alberta. Construction should be completed by mid-March. AltaGas and Real Resources will jointly construct a 22 mile pipeline to connect wells owned by Real to AltaGas' Prairie River gas plant and gathering system.
Royal Dutch/Shell said it expects to have plans in place by this July to export liquefied natural gas to the United States and southern Europe from Egypt. Egypt has enough gas reserves to commit 10 Tcf to 15 Tcf to export, said Shell. Under a proposal by Shell International Gas, the company could export up to 20% of its Egyptian production to the United States. It also is considering marketing the gas to Spain and Portugal. No specific production figures were disclosed. The U.S. LNG market has drawn a crowd lately, with several North American companies announcing plans to build new facilities in the next few years. In just the past few weeks, Enron Corp., El Paso Corp., Williams and BP have announced plans to serve North America with LNG (see NGI, Feb. 12). CMS Energy, which operates the largest North American LNG facility in Lake Charles, LA, also said in February it would expand its operations (see NGI, Feb. 26). Shell, however, would not build a LNG facility in the United States, but transport the supplies into the country. It has proposed building a $1 billion LNG plant and another gas-to-liquids facility in Egypt and then would market the gas through its affiliates.
Hunt Oil Co. of Canada has agreed to pay C$176 million (US$115 million) for a portion of Canadian 88 Energy Corp.'s Alberta natural gas properties to expand its natural gas production in the region. The acquisition includes all of Canadian 88's interests in the Caroline "B" pool natural gas project in west central Alberta and the Waterton gas property in southwestern Alberta. Along with reserves and production, the acquisition includes 66,000 net acres of undeveloped land and a 3D seismic database, which will be used to develop new exploration opportunities. Currently, Hunt holds a 50% working interest in the Caroline "B" property. At Waterton, the company would pick up a 90% working interest and ownership of the property. Under terms of Hunt's latest offer, Calgary-based Canadian 88 said a "substantial portion" of the Waterton lands and petroleum and natural gas rights are subject to a right-of-first-refusal. If the right-of-first-refusal is exercised and closed, Canadian 88 would receive the proceeds from the Waterton sale and Hunt Oil could elect to not purchase the Caroline assets for C$64 million. The refusal process is expected to take about a month, and if it closes, Canadian 88 expects to use the proceeds from the sale to pay down a C$195 million debt.
Concluding that the action was both "reasonable and in the public interest," the Michigan Public Service Commission has approved a request by Michigan Gas Utilities for a special gas transportation contract with Rock-Tenn Paperboard Products, one of the largest accounts on MGU's system. The Rock-Tenn facility currently takes service under MGU's TR-3 transportation tariff to satisfy its annual load of approximately 800,000 Mcf at its plant in Otsego, MI. MGU said Rock-Tenn had a bypass study prepared for the Otsego plant indicating that bypass was a viable alternative. Because of the competitive alternative, MGU entered into a special contract with Rock-Tenn covering both the existing plant and a proposed new facility. Except for the rates, MGU said that the terms of the contract were materially the same as those provided in its tariffs and that the contract was a product of "good faith negotiations that included consideration of existing and future competitive options available to Rock-Tenn." The rates were not publicly disclosed. The commission determined that MGU "should have leeway" to negotiate prices and other terms "as it sees fit," unless the contract violated statutes, rules or orders or harmed other ratepayers, and the contract did not appear to do that.
Just a week after receiving its final Federal Energy Regulatory Commission certificate to proceed (see NGI, Feb. 26), Gulfstream Natural Gas System LLC has an agreement with Florida Power Corp. to provide firm natural gas transportation service to some of its electric generating plants, including the Hines Energy Complex in Polk County. The Hines Energy Complex came on line in 1999 with 482 MW, and a second 495 MW phase begins operation in November 2003. The Gulfstream agreement calls for it to provide service to Hines 2 and other Florida Power plants. Florida Power CEO William Habermeyer Jr. said the "Gulfstream pipeline is fulfilling a demonstrated need in the state for additional natural gas delivery. Having the pipeline in place is integral to our ability to expand the electric generation infrastructure to meet the current and anticipated needs of our growing customer base." Gulfstream is a joint interstate natural gas pipeline development of Williams and Duke Energy, which purchased the system from The Coastal Corp. for $1.7 billion. It is scheduled to be in service in June 2002. The proposed 744-mile pipe will extend from Mississippi and Alabama across the Gulf of Mexico to serve Florida. Florida's energy demands are expected to increase 25% by 2007.
UtiliCorp United announced that its wholly-owned subsidiary Aquila Energy has changed its name to Aquila, Inc. to reflect Aquila's increasing participation in markets outside the energy industry. In addition to trading natural gas and power throughout North America and Europe, the company entered the broadband capacity market last year. It also offers a broad range of risk management products and services to its clients, including a family of weather risk products. Aquila is a Latin word meaning eagle. It also is the name of a constellation containing the star Altair. In some cases this constellation is known as the flying eagle.
DTE Energy Services has formed a strategic alliance with Washington Group International for engineering and construction services. Under the alliance, Washington Group will be the firm of choice for engineering and construction support for DTE Energy Services projects in the merchant power sector and in the industrial energy sector. One of the first projects on which Washington Group will participate is a proposed 320 MW merchant power facility in the Midwest, using four General Electric 7-EA combustion turbines. Washington Group has worked on several other projects for DTE Energy Services, an affiliate of Detroit Edison, including a recently completed pulverized coal injection facility for Bethlehem Steel in its Sparrows Point, Maryland facility. The alliance will be managed by Washington Group's Princeton, NJ office.
Aquila Inc., a wholly owned subsidiary of UtiliCorp United, announced that it has entered into an agreement to purchase an additional 10 natural gas-fired turbines from General Electric (GE). Combined with previously announced agreements, Aquila has ordered a total of 21 turbines over the past 12 months. Aquila's newly ordered units are each capable of producing 85 MW, and are expected to be used in simple cycle peaking facilities. Aquila said it intends for many of the new turbines to be used in the Midwest markets. Of the 11 units that were ordered previously from GE and Siemens Westinghouse, eight are already slated for summer 2002 peaking facilities the company is developing in Clay County, IL, and Coahoma County, MS. The company said all of its acquired turbines should be in commercial operation by summer 2003 at the latest. As an independent power producer, Aquila has investments in 18 projects in Alabama, California, Florida, Georgia, Illinois, Maine, Mississippi, New Jersey, New York, Washington and Jamaica. Including this latest turbine order, Aquila will have more than 4,100 MW of power that it controls or that is under development.
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