El Paso’s proposed 1 Bcf/d Continental Connector pipeline project, which originally was considered a competitor to the Rockies Express Pipeline, has been shelved. El Paso CFO Mark Leland told the Deutsche Bank High Yield Conference Wednesday that Continental Connector is “unlikely to move forward” because Barnett Shale producers opted to send their production to market on a competing pipeline system.

Rockies producers were not even mentioned. Most western producers apparently chose Rockies Express over Continental Connector early on in the El Paso project’s evolution.

El Paso launched Continental Connector in fall of 2005 as a $1-2 billion system that would link its Rocky Mountain region pipelines — Wyoming Interstate, Colorado Interstate Gas and Cheyenne Plains — with its eastern pipelines — ANR, Tennessee Gas and Southern Natural. The project was designed initially to span about 1,000 miles with 42-inch diameter pipe, delivering Rocky Mountain production as well as supply from the Midcontinent and North and East Texas to eastern and midwestern markets (see Daily GPI, Oct. 5, 2005).

In November 2005, Enogex signed a letter of intent to take 500,000 Dth/d of capacity on the proposed system and planned to lease 750,000 Dth/d of capacity on its own Oklahoma pipelines to El Paso as part of Continental Connector (see Daily GPI, Nov. 7, 2005). The plan was expected to eliminate the need to build about 180 miles of greenfield pipe.

Following an open season last fall, El Paso announced that it received expressions of interest from potential shippers for 3 Bcf/d of capacity on the proposed system (see Daily GPI, Dec. 1, 2005). However, by last spring it became clear that the project would take a different shape than originally anticipated. Rockies producers ended up looking for space on the competing 1.8 Bcf/d Rockies Express system. More interest was seen from the Midcontinent and the Barnett Shale in Texas. El Paso ended up with a project that would have included only about 300 miles of greenfield construction mainly in Arkansas, Texas and Louisiana.

In the meantime, numerous other projects were being planned to tap the Barnett Shale’s growing supply and bring it to the Perryville Hub in Louisiana. Just this week, the Federal Energy Regulatory Commission approved CenterPoint Energy Gas Transmission’s plan to deliver 1.24 Bcf/d of gas from Texas to Perryville (see Daily GPI, Oct. 4). Other projects have been planned by Gulf South, Texas Gas, Crosstex, Energy Transfer and Kinder Morgan.

In addition, Duke Energy has teamed up with CenterPoint to propose the Midcontinent Connector, which would deliver 1.75 Bcf/d of gas from Texas and Oklahoma to Pittsburgh, PA (see Daily GPI, June 2). With all the competition, El Paso ended up without the commitments required to move forward on Continental Connector.

Leland told analysts the company does not see any financial impact on its earnings growth forecast of 4-6%. He also noted that El Paso has numerous other pipeline plans under development.

However, Credit Suisse analyst Carl Kirst lowered his target price on the company’s stock 6% because of the announcement. He said the project would have contributed 75 cents/share to the company’s earnings.

“Given the intense regional competition we had not subscribed to the potential $1-2 billion overarching project, but we did think a scaled down $750 million project was feasible given EP’s first-mover advantage relative to four other Midcontinent proposals,” Kirst said.

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