FERC has approved the purchase of ChevronTexaco’s 32-mile Mobile Area Gathering System (MAGS) by affiliate Chandeleur Pipe Line Co. for $15.4 million. The commission also has granted Chandeleur a certificate to expand its interstate pipeline capacity to 331,000 Dth/d, which will accommodate additional volumes from ChevronTexaco Natural Gas and Callon Petroleum.

Chandeleur currently receives production (up to 321,000 Dth/d) from the Main Pass, Chandeleur Sound, Mobile and Viosca Knoll areas and transports it to a refinery in Pascagoula and to three downstream pipelines: Destin, Texas Eastern and Gulf South. The MAGS pipeline begins at an interconnect with Chandeleur at Mobile Block 861, offshore Mississippi, runs east to Block 908 and turns northeast to the southern shore of Dauphin Island. From there is crosses the island and continues to the mainland ending at Coden, AL, near Mobile Bay. MAGS delivers 75,000 Dth/d to Transcontinental Gas Pipe Line, Florida Gas Transmission (FGT) and Gulf South and 80,000 Dth/d to an offshore interconnect with Chandeleur at Mobile Block 861.

Chandeleur told FERC that pricing differentials that exist between the market areas in the Eastern Louisiana zone at Pascagoula and the FGT Zone 2 at Coden, AL, work against such a flow pattern. Chandeleur said that shippers prefer to nominate their production through MAGS to Coden where they can receive higher FGT Zone 3 prices, rather than nominate the same volumes into Chandeleur and achieve netbacks based on East Louisiana pricing, which has at times run considerably below FGT Zone 3 pricing. Chandeleur’s proposed acquisition of MAGS will increase delivery flexibility for its shippers by adding three Coden area interstate pipeline interconnects (FGT, Transco and Gulf South), which will expand market opportunities for existing shippers.

Combining the two pipelines, Chandeleur and MAGS, also provides additional operational flexibility that will enable Chandeleur to raise its transportation capacity. During a recent open season, ChevronTexaco Natural Gas signed a transportation agreement for 43,000 Dth/d of firm transportation capacity on the combined system, and Callon Petroleum executed an agreement for 32,000 Dth/d in the first year with declining amounts continuing over the following six years.

Murphy Oil also owns a share of the MAGS system and Chandeleur told the Commission it will continue to negotiate with Murphy to acquire the remaining interest in the system.

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