The European Commission has approved Chevron Corp.’s purchase ofTexaco Inc., clearing one hurdle on its road toward a successfulmerger by possibly this summer. Still to come is the lengthy U.S.approval process, including approval by the U.S. Federal TradeCommission. In a statement, the European Commission said that “thenumber of areas where the companies’ activities overlap in Europeis limited and where they do (overlap), the combined market sharesremain below 15%.” Chevron has sold most of its Europeanoperations: some in 1984 to Texaco, another group to RoyalDutch/Shell Group in 1997 and some to Petroplus in 1998. SanFrancisco-based Chevron agreed to buy Texaco, based in WhitePlains, NY, last October for $35.1 billion in stock and assumeddebt of $7.5 billion (see NGI, Oct. 23, 2000).
In his blueprint for the federal budget, President Bush thisweek set in motion plans to possibly begin oil and gas leasing inthe coastal region of the Arctic National Wildlife Refuge (ANWR) by2004. It authorizes the Interior Department to begin a study of theenvironmental impact of drilling in the Arctic region, and to haveit completed by 2004. The final decision on whether to open up thecoastal region to drilling will rest with Congress. The Bureau ofLand Management and several cooperating agencies, such as the Fishand Wildlife Service, will conduct the environmental review, adepartment aide said.
Responding to a counteroffer this week by a consortium topurchase the energy assets of Fletcher Challenge Ltd., ShellOverseas Holdings Ltd. and Apache Corp. have made a final offer,raising their bid 4.4%, which increases the cash portion to US$3.55per share from $3.34 per share. In response, New Zealand-basedFletcher’s board of directors said it would recommend thatshareholders approve the Shell-Apache offer at next Tuesday’sspecial shareholder meeting. The latest offer came after PeakPetroleum, a consortium led by Guinness Peat Group Plc, said itwould offer $3.70 a share and asked for a court-ordered delay tomake a formal bid. In the deal, Houston-based Apache would pick upFletcher’s Canadian and Argentina natural gas assets. Even thoughthe Shell-Apache offer is less than Peak’s offer, Fletcher CEO MikeAndrews said that there was a “reasonably high risk” that Peakcould not deliver on its proposal.
Westmoreland Power, subsidiary of Westmoreland Coal Co., hassubmitted a proposal to the North Dakota Industrial Commission todevelop, own and operate, either independently or in partnership, anew state-of-the-art 500 MW lignite-fired power plant nearGascoyne, ND in connection with Lignite Vision 21. LV-21 is apartnership between the State of North Dakota and the LigniteEnergy Council designed to encourage construction of a new baseloadpower plant. It includes up to $10 million in matching funds forsuch development. Westmoreland Coal is acquiring the coaloperations of Knife River Corp., including active coal mines inNorth Dakota and Montana, and rights to develop the Gascoyne coalreserves.
To strengthen its capital structure before an anticipated spinoff this year, Tulsa-based Williams Communications exchanged assetsfor shares of stock with its parent company Williams. In theagreement, Williams received 24.3 million common shares of WilliamsCommunications, bringing its total ownership to 420 million shares,or 86% of the outstanding stock. In return for equity, WilliamsCommunications will purchase its outstanding promissory note fromWilliams and acquire the 15-story, 750,000-square-foot WilliamsTechnology Center, scheduled for completion this summer adjacent toWilliams’ headquarters in Tulsa.
IntercontinentalExchange said it set new single day tradingrecords Tuesday in global oil and U.S. power. Oil derivativetrading volumes totaled 19 million barrels including 13 millionbarrels of crude, 3 million barrels of gasoil, and 1 millionbarrels each of jet fuel and gasoline. Power trading reached 3million MWh. The energy and metals exchange was launched by aconsortium of companies last October. To date, more than 500million barrels oil derivatives and 100 million MWh of power havebeen traded. Natural gas and power products includephysically-delivered gas at fixed and indexed prices, natural gasbasis and swing swaps and firm power. ICE also trades preciousmetals, including gold and silver spot, forwards, and options.
AltaGas Services Inc. said it is investing $10.4 million toexpand three gas gathering and processing systems. The company isincreasing its processing capability in its Thornbury area innortheastern Alberta to accommodate up to 9 MMcf/d) of productionfrom 15 new gas wells. The expansion currently under constructionwill include a 7 MMcf/d natural gas processing plant and 25 milesof gathering pipelines. It also is building an 11 mile pipeline toconnect 3 MMcf/d of gas located southeast of Alsask, SK, to itsAcadia Valley gathering system in Alberta. Construction should becompleted by mid-March. AltaGas and Real Resources will jointlyconstruct a 22 mile pipeline to connect wells owned by Real toAltaGas’ Prairie River gas plant and gathering system.
Royal Dutch/Shell said it expects to have plans in place by thisJuly to export liquefied natural gas to the United States and southernEurope from Egypt. Egypt has enough gas reserves to commit 10 Tcf to15 Tcf to export, said Shell. Under a proposal by Shell InternationalGas, the company could export up to 20% of its Egyptian production tothe United States. It also is considering marketing the gas to Spainand Portugal. No specific production figures were disclosed. TheU.S. LNG market has drawn a crowd lately, with several North Americancompanies announcing plans to build new facilities in the next fewyears. In just the past few weeks, Enron Corp., El Paso Corp.,Williams and BP have announced plans to serve North America with LNG(see NGI, Feb. 12). CMS Energy, whichoperates the largest North American LNG facility in Lake Charles, LA,also said in February it would expand its operations (see NGI,Feb. 26). Shell, however, would not build a LNG facility in the UnitedStates, but transport the supplies into the country. It has proposedbuilding a $1 billion LNG plant and another gas-to-liquids facility inEgypt and then would market the gas through its affiliates.
Hunt Oil Co. of Canada has agreed to pay C$176 million (US$115million) for a portion of Canadian 88 Energy Corp.’s Albertanatural gas properties to expand its natural gas production in theregion. The acquisition includes all of Canadian 88’s interests inthe Caroline “B” pool natural gas project in west central Albertaand the Waterton gas property in southwestern Alberta. Along withreserves and production, the acquisition includes 66,000 net acresof undeveloped land and a 3D seismic database, which will be usedto develop new exploration opportunities. Currently, Hunt holds a50% working interest in the Caroline “B” property. At Waterton, thecompany would pick up a 90% working interest and ownership of theproperty. Under terms of Hunt’s latest offer, Calgary-basedCanadian 88 said a “substantial portion” of the Waterton lands andpetroleum and natural gas rights are subject to aright-of-first-refusal. If the right-of-first-refusal is exercisedand closed, Canadian 88 would receive the proceeds from theWaterton sale and Hunt Oil could elect to not purchase the Carolineassets for C$64 million. The refusal process is expected to takeabout a month, and if it closes, Canadian 88 expects to use theproceeds from the sale to pay down a C$195 million debt.
Concluding that the action was both “reasonable and in thepublic interest,” the Michigan Public Service Commission hasapproved a request by Michigan Gas Utilities for a special gastransportation contract with Rock-Tenn Paperboard Products, one ofthe largest accounts on MGU’s system. The Rock-Tenn facilitycurrently takes service under MGU’s TR-3 transportation tariff tosatisfy its annual load of approximately 800,000 Mcf at its plantin Otsego, MI. MGU said Rock-Tenn had a bypass study prepared forthe Otsego plant indicating that bypass was a viable alternative.Because of the competitive alternative, MGU entered into a specialcontract with Rock-Tenn covering both the existing plant and aproposed new facility. Except for the rates, MGU said that theterms of the contract were materially the same as those provided inits tariffs and that the contract was a product of “good faithnegotiations that included consideration of existing and futurecompetitive options available to Rock-Tenn.” The rates were notpublicly disclosed. The commission determined that MGU “should haveleeway” to negotiate prices and other terms “as it sees fit,”unless the contract violated statutes, rules or orders or harmedother ratepayers, and the contract did not appear to do that.
Just a week after receiving its final Federal Energy RegulatoryCommission certificate to proceed (see NGI, Feb. 26), GulfstreamNatural Gas System LLC has an agreement with Florida Power Corp. toprovide firm natural gas transportation service to some of itselectric generating plants, including the Hines Energy Complex inPolk County. The Hines Energy Complex came on line in 1999 with 482MW, and a second 495 MW phase begins operation in November 2003.The Gulfstream agreement calls for it to provide service to Hines 2and other Florida Power plants. Florida Power CEO WilliamHabermeyer Jr. said the “Gulfstream pipeline is fulfilling ademonstrated need in the state for additional natural gas delivery.Having the pipeline in place is integral to our ability to expandthe electric generation infrastructure to meet the current andanticipated needs of our growing customer base.” Gulfstream is ajoint interstate natural gas pipeline development of Williams andDuke Energy, which purchased the system from The Coastal Corp. for$1.7 billion. It is scheduled to be in service in June 2002. Theproposed 744-mile pipe will extend from Mississippi and Alabamaacross the Gulf of Mexico to serve Florida. Florida’s energydemands are expected to increase 25% by 2007.
UtiliCorp United announced that its wholly-owned subsidiaryAquila Energy has changed its name to Aquila, Inc. to reflectAquila’s increasing participation in markets outside the energyindustry. In addition to trading natural gas and power throughoutNorth America and Europe, the company entered the broadbandcapacity market last year. It also offers a broad range of riskmanagement products and services to its clients, including a familyof weather risk products. Aquila is a Latin word meaning eagle. Italso is the name of a constellation containing the star Altair. Insome cases this constellation is known as the flying eagle.
DTE Energy Services has formed a strategic alliance withWashington Group International for engineering and constructionservices. Under the alliance, Washington Group will be the firm ofchoice for engineering and construction support for DTE EnergyServices projects in the merchant power sector and in theindustrial energy sector. One of the first projects on whichWashington Group will participate is a proposed 320 MW merchantpower facility in the Midwest, using four General Electric 7-EAcombustion turbines. Washington Group has worked on several otherprojects for DTE Energy Services, an affiliate of Detroit Edison,including a recently completed pulverized coal injection facilityfor Bethlehem Steel in its Sparrows Point, Maryland facility. Thealliance will be managed by Washington Group’s Princeton, NJoffice.
Aquila Inc., a wholly owned subsidiary of UtiliCorp United,announced that it has entered into an agreement to purchase anadditional 10 natural gas-fired turbines from General Electric(GE). Combined with previously announced agreements, Aquila hasordered a total of 21 turbines over the past 12 months. Aquila’snewly ordered units are each capable of producing 85 MW, and areexpected to be used in simple cycle peaking facilities. Aquila saidit intends for many of the new turbines to be used in the Midwestmarkets. Of the 11 units that were ordered previously from GE andSiemens Westinghouse, eight are already slated for summer 2002peaking facilities the company is developing in Clay County, IL,and Coahoma County, MS. The company said all of its acquiredturbines should be in commercial operation by summer 2003 at thelatest. As an independent power producer, Aquila has investments in18 projects in Alabama, California, Florida, Georgia, Illinois,Maine, Mississippi, New Jersey, New York, Washington and Jamaica.Including this latest turbine order, Aquila will have more than4,100 MW of power that it controls or that is under development.
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