Taking advantage of a consent order that required ChevronTexaco to sell some assets before a merger could be completed, Duke Energy Field Services (DEFS) picked up a jewel — a 33% stake in Discovery Producer Services LLC, which extends from the deepwater offshore Louisiana to onshore delivery points 30 miles south of New Orleans. The system includes a 600 MMcf/d interstate gas pipeline, including a 30-inch mainline that extends to the edge of the outer continental shelf. Financial details were not disclosed, and the transaction is expected to close in the second quarter.

The Discovery assets, which were primarily constructed in 1997, include the interstate mainline, a condensate handling facility, a 600 MMcf/d cryogenic gas processing plant, a 42,000 bbl/d fractionator, 400 MMcf/d of deepwater gathering laterals and a fixed-leg platform at Grand Isle 115 to host deepwater developments.

The sale by ChevronTexaco was mandated in a consent order by the U.S. Federal Trade Commission (FTC) as a condition of approving the merger between Chevron and Texaco, which closed last fall (see NGI, Sept. 10, 2001). To satisfy the FTC’s apprehension that the merger, as initially proposed, would violate antitrust law, Texaco agreed to divest its U.S. refining and marketing affiliates, including the Discovery Pipeline System, within six months of the merger date. The sale is subject to FTC approval. On March 12, the FTC opened a 30-day public comment period on the proposed transaction.

The agreement will significantly expand DEFS’s midstream presence in the eastern Gulf of Mexico, said Mark Borer, DEFS senior vice president. “Discovery is strategically positioned to serve both shallow and deepwater eastern Gulf of Mexico producers, including some of the most prolific deepwater areas such as Green Canyon, Mississippi Canyon, Ewing Bank and Atwater Valley,” he said.

Discovery’s two other partners are Williams and the U.S. subsidiary of British-Borneo Petroleum Syndicate, which both hold a 33.3% stake. The system, valued at $340 million when it was constructed, began deliveries in 1998 (see NGI, April 6, 1998).

DEFS, headquartered in Denver, already owns and operates 64 plants, 57,000 miles of pipeline and had revenues of $10 billion and assets of $6 billion in 2001. Current handled volumes exceed 8,5 TBtu/d of natural gas and 400,000 billion bbl/d of natural gas liquids. DEFS also owns the general partner of TEPPCO Partners L.P., a publicly traded master limited partnership. DEFS was formed by combining the Duke Energy and Phillips Petroleum natural gas gathering and processing businesses. Duke Energy owns approximately 70% of the joint venture and Phillips Petroleum owns about 30%.

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