NGI The Weekly Gas Market Report
The Federal Energy Regulatory Commission Friday issued a certificate to El Paso Natural Gas pipeline for a compression expansion of its East Valley Lateral in Pinal County, AZ. The project calls for the construction of the Picacho Compressor Station, which will consist of three compressor units totaling 8,290 hp, on the 36.7-mile lateral to interconnect with both Transwestern Pipeline’s recently approved Phoenix lateral and El Paso’s mainline. El Paso has pegged the cost of the compression expansion at approximately $24 million. El Paso purchased the lateral in 2006 from Salt River Project Agricultural Improvement and Power District. The acquisition was subject to two repurchase options by Salt River or its assignee, Transwestern. Transwestern already has exercised one option to acquire 203,500 Dth/d of capacity on the lateral and has another option to pick up 30,000 Dth/d of capacity. The proposed compression expansion would increase East Valley Lateral’s capacity to 372,500 Dth/d from its existing level of 342,500 Dth. This would allow Transwestern to exercise its second capacity option and enable El Paso to own 130,000 Dth/d of firm capacity. “Construction of the compressor station will ensure that El Paso is able to maintain existing services and also provide El Paso with additional flexibility for service in the Phoenix area, particularly during peak-demand periods,” the order said [CP07-448].
Citing deteriorating market conditions, Plains All American Pipeline LP has withdrawn its initial public offering (IPO) for a master limited partnership (MLP), mirroring recent news by other energy companies. XTO Energy Corp. said it would not pursue an MLP (see related story), and market turbulence was cited by OGE Enogex Partners LP and EXCO Resources Inc. in delaying their MLP plans (see NGI, Jan. 28). The withdrawal of the registration statement for an IPO by Plains GP Holdings LP was filed with the Securities and Exchange Commission. The partnership stated that “market conditions have substantially deteriorated since the IPO process began in August 2007.” Plains noted that the offering’s intent was to sell a “relatively small minority interest to the public.” Plains All American engages in the transportation, storage, terminaling and marketing of crude oil, refined products and liquefied petroleum gas and other natural gas-related petroleum products. Through its 50% ownership in PAA/Vulcan Gas Storage LLC, the partnership also develops and operates natural gas storage facilities in Michigan and Louisiana.
Standard & Poor’s Ratings Services (S&P) again issued negative outlooks for some of the counterparties while affirming the ratings on $1.4 billion in bonds by two California municipal utility pre-paid natural gas deals. Long Beach, CA, and the Southern California Public Power Authority (SCPPA) separately put together the deals, and AIG Matched Funding Corp (AIGMFC) is the counterparty in both deals that drew S&P’s negative outlook. Long Beach Bond Finance Authority is the city’s vehicle for financing a 30-year pre-pay supply deal that is supposed to satisfy 80-90% of city-run utility’s 12-13 Bcf annual gas demand with terms that were designed to keep its retail rates below the surrounding Sempra Energy utilities for the next three decades. The deal was put together with Merrill Lynch Commodities Inc. and was unique in that it is not priced just to the California-Arizona border prices for natural gas. S&P said the ratings on the pre-pay transaction are tied to the Long Beach financing arm’s gas supplier, and that Merrill Lynch & Co. Inc. guarantees it supply unit’s obligations under the transaction. Combined, the gas contracts involve $1.26 billion in project revenue bonds.
Spectra Energy Corp. is proposing to expand its gas gathering system to accommodate growing production in the Grizzly Valley area of northeastern British Columbia. The proposed project is part of a third phase of expansion related to the company’s Pine River facility and would allow for the transport of incremental raw gas to its Pine River Gas Plant near Chetwynd, BC. The project would involve approximately 17 kilometers (10.6 miles) of pipeline running parallel to existing lines and would add gathering capacity in excess of 40 MMcf/d. Spectra has been performance-testing its Pine River plant and making operating adjustments to accommodate the increased delivery of gas. The company filed a pipeline application for this facility expansion with the National Energy Board in December 2007 and said it expects the new line and associated facilities modifications within the Grizzly Valley operating area to be operational by November 2008.
TEPPCO Partners LP affiliate Chaparral Pipeline Co. LLC is holding a binding open season for a proposed expansion of its 845-mile natural gas liquids (NGL) pipeline originating in the Permian Basin of West Texas and eastern New Mexico. The Chaparral pipeline delivers NGLs to the NGL fractionation complex in Mont Belvieu, TX. The expansion is designed to increase annual average system capacity by approximately 15,000 b/d or 20,000 b/d, depending on shipper response to the open season. The expansion would involve upgrading certain pipe sections and may include installing additional pumping capability at existing pump stations. If there is sufficient shipper commitment, the additional capacity could be available as soon as early 2009. The open season continues until noon CDT March 27. By April 30 Chaparral will notify shippers that have submitted an executed transportation services agreement whether the expansion will proceed. Details are available on the TEPPCO website, www.teppco.com. Interested shippers may also contact John Medler in TEPPCO’s midstream commercial department at (713) 381-8723 or firstname.lastname@example.org.
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