Enterprise Products Partners LP said Friday that operations at its Pioneer cryogenic gas processing facility in Lincoln County, WY, have been suspended following a release of natural gas and subsequent fire that occurred on March 27. No injuries resulted from the incident, which was restricted to a small area within the plant. Enterprise reported the incident to the appropriate government authorities and personnel on the scene worked closely with emergency responders to secure the site. Crews on Friday were in the process of determining the extent of the damage and have begun an investigation into the cause of the incident. Based on preliminary findings, Enterprise expects the facility to resume service in approximately two to three weeks. In the meantime, all gas volumes are being diverted to the partnership’s adjacent silica gel gas processing plant. Prior to the incident, the Pioneer cryogenic facility was processing about 550 MMcf/d and extracting approximately 26,000 b/d of natural gas liquids. Enterprise does not expect the service interruption to materially affect the partnership’s gross operating margin or net income for 2008.
The Pennsylvania Public Utility Commission (PUC) has voted 4-0 to consider a rate increase request by Columbia Gas of Pennsylvania Inc. According to Columbia Gas, one of the reasons for the increase is to support continued implementation of a program that began last year to annually replace 600,000 feet of aging underground pipes and distribution facilities. It also wants to upgrade its system using new technologies. The request would increase the company’s annual revenues by $58.9 million, or 10.3%. Under the proposal, the monthly bill for an average residential customer using 7.2 Mcf would increase by about $10.99, to $113.94 from $102.95. By law, any increase would be suspended for up to seven months from its proposed effective date. The PUC voted to open an investigation and assign it to a PUC administrative law judge for a recommended decision or settlement. PUC commissioners then would make a final decision by Oct. 28. The increase would affect about 370,556 residential, 37,914 commercial and 327 industrial customers in Adams, Allegheny, Armstrong, Beaver, Bedford, Butler, Centre, Chester, Clarion, Clearfield, Elk, Fayette, Franklin, Fulton, Greene, Indiana, Jefferson, Lawrence, McKean, Mercer, Somerset, Venango, Warren, Washington, Westmoreland and York counties. More information is available from the PUC website at www.puc.state.pa.us. The Columbia Gas request is filed under Docket No. R-2008-2011621.
Australian producer BHP Billiton is assessing how to repair its Neptune tension leg platform (TLP) in the deepwater Gulf of Mexico (GOM) after discovering “structural anomalies.” BHP evacuated the platform’s personnel after irregularities in the hull were found during visual inspections. However, BHP determined after an inspection that the crews could return to work on the platform, said spokeswoman Teresa Wong. The company now is assessing how to determine “the appropriate course of action” to mitigate the undisclosed problems. The start-up date remained indefinite late last week. The $1.1 billion Neptune TLP originally was scheduled to ramp up at the end of 2007. Once onstream, Neptune is expected to produce up to 50,000 b/d of oil and 50 MMcf/d of natural gas. Recoverable reserves at the Neptune field are estimated by BHP to range from 100 million boe to 150 million boe. Seven initial subsea wells are to be tied back to the TLP, with the oil and gas exported to shore via the existing Caesar and Cleopatra trunk lines. The Neptune field comprises Atwater Valley Blocks 573, 574, 575, 617 and 618, and water depths range from 4,200 feet to 6,500 feet. Located about 120 miles off the Louisiana coast in Green Canyon Block 613, the TLP is secured in about 4,230 feet of water. The 5,900-ton hull was completed by Signal International LLC in Port Arthur, TX, and is said to be the first of its kind for the fabrication yard. According to BHP, the TLP design is similar to the Chevron Corp./BHP Typhoon platform in Green Canyon Blocks 237 and 238. BHP operates Neptune with a 35% working interest. Partners in the venture are Marathon Oil Corp. (30%), Woodside Petroleum Ltd. (20%) and Repsol YPF SA (15%). When BHP approved the project for development in June 2005, it estimated total costs at US$850 million. Neptune was discovered in 1995 and was the first discovery in the Western Atwater Foldbelt. An initial appraisal well (Neptune-2) was drilled in 1997. BHP took over operatorship in 2002, subsequently drilling four appraisal wells, with two sidetracks, to delineate the field.
The board of directors of Consol Energy Inc. has voted to terminate the company’s offer for all of the outstanding shares of independent producer CNX Gas Corp., a stock-for-stock deal that had been valued at approximately $932 million. Consol management recommended to the board that the company terminate the proposed exchange offer, concluding after discussions and communications “from certain holders of CNX Gas common stock” that the deal would not be in the best interest of Consol or its stockholders, the company said. Price demands from certain CNX Gas stockholders were considered to be unreasonable and recent stock market volatility made it difficult to accurately assess the ultimate cost of the transaction, Consol said. Coal producer Consol, which already owns approximately 81.7% of CNX’s 151 million shares, first announced the now dead deal in late January, saying it was making the offer to diversify its energy mix (see NGI, Feb. 4). Consol said it does not intend to sell or otherwise divest itself of the shares of CNX Gas that it currently owns and will continue buying shares of CNX Gas common stock from time to time in open market purchases. The deal originally proposed by Consol would have given CNX stockholders 0.4425 shares of Consol Energy common stock for each outstanding share of CNX common stock, the equivalent of $33.70 per share, or a 12% premium.
The Department of the Interior’s Minerals Management Service (MMS) sold more than 124.7 Bcf of natural gas in three royalty-in-kind (RIK) gas sales conducted in March. The three sales offered royalty gas from the Jonah and Pinedale areas and the Madden Field in Wyoming; from the Cliffside Helium Enrichment Unit located in Potter County, TX, near Amarillo; and offshore in the Gulf of Mexico. The more than 124.7 Bcf of royalty gas, or approximately 388,500 MMBtu/d, were sold under seven- or 12-month contracts with delivery scheduled to begin April 1. Assuming a price of $8/MMBtu, the sales would equate to more than $1 billion in total gross revenues. Actual revenues will vary based on prices over the life of the contract. The 124.7 Bcf is enough to supply the average gas needs of more than 1.5 million U.S. homes for one year. Ten companies were awarded contracts. Winning bidders were Tenaska Marketing Ventures, Constellation Energy Commodities Group Inc., Sequent Energy Management LP, Cheniere Energy Inc., Coral Energy Resources, Magnus Energy Marketing Ltd., Mieco Inc., Total Gas & Power North America Inc., UBS Energy LLC and Williams Power Co. The gas sold in the RIK sales involves an aggregation of gas royalties taken in kind in the form of product, rather than in value or cash payments, from gas production in Wyoming, from gas extracted from the Cliffside Helium Enrichment Unit in Texas, operated by the Bureau of Land Management (BLM), and offshore in the Gulf of Mexico. MMS then sells the gas competitively in the open marketplace. Begun as a pilot program more than 10 years ago, the RIK program is intended to ensure a fair return on the public’s royalty assets, improve government efficiencies, reduce regulatory costs and reporting requirements, and shorten the compliance cycle. The state of Wyoming will receive 49% of the revenues generated by the sale of Wyoming gas, since the gas production occurs within that state’s borders. Receipts from the Cliffside Helium Enrichment Unit sale are returned to the BLM.
Inergy subsidiary Arlington Storage Co. LLC (ASC) has filed with FERC to develop and operate a depleted reservoir natural gas storage project in Steuben County, NY, known as the Thomas Corners project. The project will involve conversion of the depleted Thomas Corners Field in the Town of Bath into an underground gas storage facility. ASC said the facility would have a working gas capacity of 7 Bcf and interconnections with Tennessee Gas Pipeline Co.’s Line 400 and Columbia Gas Transmission’s A-5 line. ASC also notified FERC that it plans to install and operate interconnection and metering facilities connecting to a local distribution company, Corning Natural Gas Co. ASC requests authority to charge market-based rates for the project and proposes to begin construction in October. With the acquisition of ASC (see NGI, Sept. 10, 2007), Inergy also took over as the majority owner and operator of Steuben Gas Storage Co., which owns an operating storage facility in Steuben County. The Steuben facility has approximately 6.2 Bcf of working capacity, maximum withdrawal capability of 60 MMcf/d and maximum injection capability of 30 MMcf/d. It was developed and placed in service in 1991. The storage capacity is fully contracted under long-term agreements with investment-grade counterparties. The Steuben facility is connected to Dominion Transmission‘s Woodhull line (see NGI, Dec. 25, 2006) and serves the Northeast gas market. Inergy also said it plans to expand another salt cavern storage facility near Bath for high-deliverability service. Inergy intends to develop additional caverns with approximately 4 Bcf of working capacity, maximum withdrawal capability of 150 MMcf/d and maximum injection capability of 75 MMcf/d. Once everything is completed, Inergy will have added approximately 15.6 Bcf of working gas capacity within approximately 60 miles of its existing Stagecoach gas storage facility. Inclusive of the Stagecoach operation, Inergy will control more than 40 Bcf of working capacity, making it one of the largest independent storage operators in the northeastern United States.
Regency Energy Partners LP has completed its previously announced $85 million acquisition of Nexus Gas Holdings LLC, a midstream provider of natural gas gathering, dehydration and compression services. With this acquisition (see NGI, March 3), Regency has also acquired Nexus’ agreement to purchase 136 miles of pipeline from Southern Natural Gas Co. (SNG). Before Regency can purchase the pipeline from SNG, the Federal Energy Regulatory Commission must approve the abandonment and certain closing conditions must be met. If the transaction closes under the currently anticipated conditions, Regency will purchase the pipeline from SNG and make an additional payment to Nexus. Regency funded the Nexus acquisition using borrowings under its revolving credit facility. Regency has been on an acquisition streak over the last few years. A deal late last year in which it acquired FrontStreet Hugoton LLC and FrontStreet Energyone LLC from GE Financial Services for $139 million expanded Regency’s presence in Kansas and complemented its Midcontinent gathering assets. Regency acquired Pueblo Midstream Gas Corp. earlier last year (see NGI, April 9, 2007). Regency’s general partner is majority-owned by affiliates of GE Energy Financial Services, a unit of GE (see NGI, June 25, 2007).
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