Enterprise Products Partners LP of Houston completed itsacquisition of Tejas Natural Gas Liquids LLC from Shell Oilaffiliate Tejas Energy LLC and made a long-term gas processingagreement with Shell for its Gulf of Mexico production. As a resultof the deal, Tejas Energy now owns 17.6% of Enterprise. The dealforms a fully integrated Gulf Coast NGL processing, fractionation,storage, transportation and marketing business.

All of Tejas’ NGL assets in Louisiana and Mississippi areincluded in the agreement. This includes its varying interests in11 gas processing plants (including one under construction) with acombined gross capacity of 11 Bcf/d and net capacity of 3.1 Bcf/d;four NGL fractionation facilities with a combined gross capacity of281,000 b/d and net capacity of 131,500 b/d; four NGL storagefacilities with about 29.5 million barrels of gross capacity and8.8 million barrels of net capacity; and more than 2,100 miles ofNGL pipelines.

Upon the completion of Enterprise’s previously announced $245million, 160,000 BPD NGL pipeline development, expected to becompleted in the second half of 2000, the company’s NGL productionwill have access to the major NGL markets on the Texas andLouisiana Gulf Coast, Dixie Pipeline, and global markets throughEnterprise’s export facilities on the Houston Ship Channel.

“This transaction establishes a long-term relationship betweenthe largest oil and gas producer with the largest lease position inthe NGL-rich deep-water developments in the Gulf of Mexico and theleading midstream provider of NGL fractionation, storage andtransportation services,” said O.S. Andras, Enterprise CEO. “Thistransaction is expected to be immediately accretive to cash flowfor our unit holders and should provide Enterprise with severalavenues by which to significantly increase cash flow in thefuture.” Enterprise management owns about 68% of the company.

“Entering into this partnership with Enterprise creates strongadvantages for Shell,” said Walter van de Vijver, CEO of ShellExploration & Production Co. “We believe the partnership isextremely well positioned to succeed in the NGL business, and itmeets our long-term needs for natural gas processing capacity toaccommodate our growing deep-water production.”

Benefits of the deal include the long-term gas processingagreement with Shell and the expected increase in NGL productionassociated with deep-water Gulf of Mexico developments andexploitation of Continental Shelf reserves. The deal alsoestablishes Enterprise across the entire NGL value chain and allowsfor improved NGL price realizations through access to multiplemarkets. Enterprise’s management team also will be enhanced withthe addition of key personnel from Tejas NGL.

In exchange for its NGL business, Tejas Energy received 14.5million convertible special partnership units in Enterprise and$166 million in cash. Tejas has the opportunity to earn anadditional six million convertible contingency units over the nexttwo years. The 14.5 million convertible special units received byTejas represent a 17.6% equity ownership in Enterprise. If all ofthe six million convertible contingency units are earned, theywould convert into common units between Aug. 1, 2002 and Aug. 1,2003. Tejas’ ownership interest in Enterprise would then increaseto 23.8%.

In January Tejas Natural Gas Liquids LLC and Enterprise formedjoint venture Entell NGL Services LLC to develop a gas liquidstransportation and distribution system, building on Enterprise’sexisting pipeline facilities in Louisiana (see Daily GPI, Jan. 6). Tejas Natural Gas Liquids is nowa part of Enterprise, as is the Entell joint venture. Enterprise iscurrently engaged in developing a pipeline linking storage at BreauxBridge, LA, to Mont Belvieu, TX. The pipeline is to be capable ofdistributing products from key NGL sources in southern Louisianadirectly to major NGL markets, including the lower Mississippi Rivercorridor, Dixie pipeline, Lake Charles, LA, and Mont Belvieu.

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