BP Amoco exercised its right of first refusal to buy SouthernNatural Gas Co.’s one-third interest in the Destin Pipeline,growing its share to two-thirds. Tejas Destin LLC holds theremainder.

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

“Generally speaking, we see the eastern Gulf of Mexico to be arobust corridor for future gas production, and this will be a keyinfrastructure element to move that gas to market,” Keith said ofthe company’s decision to buy another third of Destin.

Current Destin throughput is about 600 MMcf/d, which is expectedto grow to the nameplate capacity of 1 Bcf/d in the next severalyears. Keith said there are a number of prospects in the area thatcould contribute to throughput, and the company is negotiating withsome of the producers. He also said an additional Destin tie-in wasin the works but declined to give details.

“The Destin Pipeline is an important link in the value chainbetween 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 theDestin Pipeline and the gas plant were built to accommodateexpansion, reflecting the increased development activity throughoutthe region.”

Keith said Destin throughput is on schedule with initialexpectations for the project. He conceded the eastern Gulf pipelineinfrastructure has turned out to be stronger than what waspredicted back in 1996 when Destin was being proposed. Productionlevels have been equal to expectations. Some prospects haven’tpanned out, but others have taken their place, he said. “Thecorridor is as robust as we thought it was going to be.”

Formed as Destin Pipeline, LLC, the original owners wereaffiliates of BP Amoco, Sonat Inc. and Shell Oil Co. Constructionof the $460 million pipeline and Pascagoula Gas Plant project beganin December 1997 with initial start up in September1998. In late1998, a 45-mile extension added a 24-inch diameter pipelineconnecting Destin’s 36-inch mainline hub platform at Main PassBlock 260 to Chevron’s facility at Viosca Knoll Block 900.

Destin has a 121-mile offshore segment and a 134-mile onshoresegment. The 36-inch offshore mainline runs 76 miles from Main PassBlock 260 to the Pascagoula Gas Plant. BP Amoco operates the plantand holds a 60% interest, and Enterprise Products Partners LP ofHouston holds the remaining 40% interest. Destin’s onshore portioninterconnects with five pipelines to deliver gas to markets servedby the Koch Gateway, Florida Gas, Transcontinental Gas, TennesseeGas, and Southern Natural Gas pipelines.

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