Three weeks of severe weather in the Gulf of Mexico have leftproducers with their heads spinning and have sent Gulf productionon a roller coaster ride, but producers should find some solace inthe large number of pipeline companies scrambling to serve theirgrowing transportation needs with new projects. In total, the newpipeline expansions announced last week could add more than 1 Bcf/dof additional pipeline access to markets for deep-water supplies.
The projects announced by Koch Gateway, Columbia Gulf, TennesseeGas and a new agreement involving producers and Dauphin IslandGathering should alleviate existing pipeline constraints andprovide more flexibility in reaching processing. They add to the1.6 Bcf/d of new Gulf infrastructure that already has been broughton line this month.
On the heels of its 315 MMcf/d mainline expansion project,Mainline ’99, which was filed with the Federal Energy RegulatoryCommission in June and should be in service in December 1999,Columbia Gulf Transmission announced plans to build the Sea StarPipeline system. Columbia currently is negotiating with potentialpartners to build the new system. It is designed to bring 660MMcf/d of offshore production to processing facilities at GrandIsle, LA. The 56-mile project would include a 30-inch diametermainline and two 24-inch diameter laterals. It would serveplatforms in the South Pass and West Delta South Addition areas ofthe Outer Continental Shelf.
“These projects combine with Mainline ’99 to provide a directconduit to demand growth markets in the East, Northeast and Midwestfor Gulf of Mexico gas supplies, including those produced in deepwater,” said Columbia Gulf President Terrance L. McGill.
An open season for capacity on Sea Star started last week andwill close Sept. 29. Sea Star will offer shippers both firmtransportation service and flex-firm service, as well asinterruptible transportation. To be eligible for flex-firm,shippers must commit to transport through Sea Star at least 80 Bcfof proven recoverable reserves at each requested receipt point. SeaStar firm transportation will have a demand charge of $3.861/Dth,and a combined volumetric rate of $0.1269/Dth, or the maximumdemand and commodity rates approved by FERC, whichever is lower.Shippers must agree to a minimum term of 10 years, with servicebeginning no later than Dec. 1, 1999.
To provide new capacity downstream of Sea Star, Columbiaannounced last week it would add 600 MMcf/d though looping andcompression to its East Lateral, which extends from Grand Isle toCenterville, LA. However, it faces stiff competition with anotherexpansion also announced last week by Koch Gateway.
Initially, Koch plans to build a five-mile supply lateral toconnect its mainline to Grand Isle. That first phase will create300 MMcf/d of downstream capacity at a cost of only $7 million,which a Koch spokesman said would enable the project to win handsdown in a competition with Columbia.
“It’s very low in capital expenditures. We can put it in placevery quickly. We don’t need a certificate for the first phase. Andwe don’t have to have 10-year commitments because we’re willing totake the risk,” said Koch Gateway Senior Vice President RenatoPereira. “We said we’ll take minimum three-year terms. If theproducers or shippers don’t want to commit immediately, we’ll stillbuild the line. We would just try to get our business done on aday-to-day basis.”
Koch said the costs will fall under its blanket certificatelimits and will cause no rate impact. As a result, Koch can moveforward without filing an application with FERC. Phase II, which iscontingent on demand, would require new pipeline looping andcompression, adding another 300 MMcf/d. Capacity on these projectsis expected to be available in the fourth quarter of 1999.
DIGP Inks Deal with Producers
Meanwhile farther east in the Viosca Knoll area of the Gulf,Dauphin Island Gathering Partners (DIGP) added some long-termsecurity to its Phase II expansion, which is slated to be inservice in October adding 1.1 Bcf/d of capacity. DIGP signed anunique supply and gathering agreement with producers ElfExploration Inc., Coastal Oil and Gas, Nippon Oil ExplorationU.S.A. and Pogo Producing, who are partners in the deep-water Virgoprospect.
The deal commits the producers’ gas supplies from a four-blockunit around Viosca Knoll Block 823 to the DIGP system. In returnDIGP will provide deep-water wellhead production handling servicesas well as downstream gathering and transmission services. DIGPwill build a 17-mile, large-diameter gathering lateral to connectthe Virgo platform to the existing DIGP system in the vicinity ofMain Pass-East Addition Block 225. In addition, DIGP will haverights to the Virgo platform facilities, which will serve as astrategic hub to attach new gas supplies from other deep-waterdevelopments.
The Virgo producers have commissioned construction of a platformthat will be set in 1,130 feet of water in Viosca Knoll Block 823.Construction of the platform is underway, and pipeline constructionis planned for mid-1999 for an anticipated production startup oflate 1999.
DIGP is a 260-mile pipeline system designed to gather naturalgas supplies from the prolific eastern Gulf. It is the only systemin the region that provides outlets to both Venice, LA, and Coden,AL. DIGP placed Phase I of its system expansion into service inApril, making it the first eastern Gulf of Mexico pipeline totransport deep-water gas production to onshore facilities inAlabama. DIGP is a partnership of subsidiaries of Duke Energy(37.3%), MCN Energy (34.5%), Coastal (13.6%), Consolidated NaturalGas (13.6%) and Titan Offshore (1%).
Tennessee Adds Mississippi Canyon Connection
Tennessee Gas Pipeline and Mississippi Canyon Gas Pipeline saidlast week they will build a 400 MMcf/d interconnect in Venice, LA.The project will link deep-water production areas behindMississippi Canyon Gathering (a unit of Tejas Offshore) with marketareas served by Tennessee. Tennessee plans to accept nominations atthis new point starting with April 1999 flows. Tennessee isconducting a binding open season that ends Sept. 25. Successfulbidders in the open season will be announced on September 28, 1998.
“Construction of this new interconnect, paired with the justcompleted expansion of our South Pass system, demonstrates ourcontinuing commitment to addressing the needs of Gulf of Mexicoproducers,” said Tennessee Gas President John Somerhalder II.Tennessee added 200 MMcf/d of new capacity to the severelyconstrained South Pass system in August.
Destin, Mobile Bay, Tennessee Additions
Other recent capacity additions in the Gulf include DestinPipeline, which put 1 Bcf/d of capacity into service Sept. 1 fromMain Pass 260 to Pascagoula, MS, where it connects with Florida Gasand Koch Gateway. The pipeline expects to complete its northernportion, from Pascagoula to connections with Transco, SouthernNatural and Tennessee in Clark County, MS, by mid-November. ADestin spokesman said the pipeline expects to be flowing 300 MMcf/dby the end of the year, 600 MMcf/d by the 3Q99 and the total 1Bcf/d in 2000 or 2001. Current throughout is 100 MMcf/d.
Transcontinental Gas Pipe Line completed Phase I of its MobileBay lateral expansion this month, bringing on line 350 MMcf/d ofcapacity. Phase II is expected to increase capacity by 136 MMcf/din November.
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