ConocoPhillips exercised an option to acquire a 25% stake in the Rockies Express Pipeline Project, Kinder Morgan Energy Partners LP (KMP) and Sempra Pipelines & Storage said Friday. The oil major, whose Lower 48 natural gas output increased substantially with its acquisition of Burlington Resources (see Daily GPI, April 3), said it will move gas production on the pipeline in addition to owning a stake.
The 1,663-mile pipeline, first announced last year (see Daily GPI, Aug. 18, 2005), will transport natural gas from the prolific producing basins in Wyoming and Colorado to the upper Midwest and eastern United States. The approximately $4.4 billion project will have the capability to transport 1.8 Bcf/d of natural gas. Binding firm commitments from creditworthy shippers have been secured for virtually all of the capacity on the pipeline, KMP said.
“We believe this project is a strategic addition to our natural gas business and will provide ConocoPhillips and others a long-term outlet for delivering Rocky Mountain production to the upper Midwest and Eastern United States,” said Randy L. Limbacher, executive vice president, exploration and production-Americas, for Houston-based ConocoPhillips.
ConocoPhillips was already a top North American gas marketer when it purchased Burlington and has been in a regular top five participant in NGI‘s quarterly compilation of Top North American Gas Marketers. Its leadership was confirmed by a study in June by energy consultant John S. Herold, which placed ConocoPhillips in fourth place among leading North American gas producers (see Daily GPI, June 23).
Burlington’s focus was on exploring for natural gas in the Rocky Mountains, and at the close of 2004, Burlington had total reserves of 2,001 million boe, or 12 Tcfe. In 2005, Burlington produced 475,000 boe/d. The combined ConocoPhillips-Burlington company had pro-forma reserves of 10.5 billion boe as of the close of 2004, of which 52% are in North America, and pro-forma production of 2.3 MMboe/d in 2005, half of which is in North America.
KMP, which will operate the pipe, now owns 51% of the equity in the project, but it will give up 1% interest to ConocoPhillips when the pipe is completed. (ConocoPhillips now holds a 24% stake). Sempra Pipelines holds the remaining 25% stake. No additional changes in the ownership structure of the Rockies Express Pipeline project are anticipated at this time, KMP said in a statement.
The Federal Energy Regulatory Commission last month granted a request by Rockies Express to begin pre-filing for the third leg of the project (see Daily GPI, June 15). FERC already has approved the first leg of the project, and in late May, KMG and Sempra requested approval to build the second leg (see Daily GPI, June 1).
Interim service already has begun on the initial 136-mile segment, which runs from Meeker, CO to the Wamsutter Hub in Sweetwater County, WY. Construction on the 192-mile segment from the Wamsutter Hub to the Cheyenne Hub in Weld County, CO, is scheduled to begin this summer and is expected to be in service by Jan. 1. Currently, a binding open season is under way to assess interest in extending the pipe further eastward from the Clarington Hub in Monroe County, OH, to Oakford, PA (see Daily GPI, June 21).
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