Attempting to consolidate its offshore pipeline assets under onecompany, El Paso Energy Corp.’s El Paso Field Services sold itsinterest in an offshore gathering system to Leviathan Gas PipelinePartners L.P. for $85.26 million in cash and stock exchanges. ElPaso will receive $63.945 million in Leviathan stock, improving itsholding interest in the company from 27.3% to 34%. The sale of theViosca Knoll Gathering Co. (VKGC) still needs to be approved byLeviathan’s board of directors. El Paso said the deal will beratified by March 31 and that no employees will be affected.

The increase in stock ownership signals El Paso’s dedication toLeviathan as its main deep-water Gulf development arm. “LeviathanGas will be the vehicle for all of El Paso’s future offshoredevelopments,” said El Paso Field Services President Bob Philips.

Paula Delaney, an El Paso spokeswoman, said Leviathan is asignificant part of El Paso’s offshore Gulf strategy. “We want toumbrella as much under Leviathan as we can,” she said. “They havethe expertise to continue our position as the top gatherer in theGulf of Mexico. One reason we want to retain this position isbecause then we can continue to fill our own onshore pipes with ourown offshore gas.”

The 125-mile, 20-inch pipeline system serves the Main Pass,Mississippi Canyon, and Viosca Knoll areas southeast of NewOrleans. It has facilities that generate 7,000 hp of compressionand is capable of delivering 1 Bcf/d to the Tennessee Gas, ColumbiaGulf Transmission, Southern Natural, Transcontinental, and Destinpipelines.

This transaction marks the second relocation of El Paso assetsto Leviathan’s control. In late October, the gathering companyacquired 100% interest in the Sunday Silence field in the EwingBank area of the Gulf. El Paso relocated control of this field,which produces 5.4 MMcf/d, to Leviathan after acquiring the assetwhen it bought Deeptech International in March for $450 million.”That was the first time El Paso put an asset under Leviathan’scontrol, and now it is becoming corporate strategy,” Delaney said.

Leviathan Gas is one of the largest independent gatherers ofnatural gas in the Gulf. It transports more than 3 Bcf/d. Besidesthe Viosca and Sunday Silence assets, it also holds interest inseven gas pipeline systems and five offshore leases.

John Norris

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