Briefs

Nicor Enerchange LLC said it signed an agreement with Caledonia Energy Partners LLC of Dallas to market and administer the proposed 11.7 Bcf Caledonia storage project in northeast Mississippi. An open season is currently underway for the storage facility, which is a depleted gas reservoir. The project will have a direct interconnect with Tennessee Gas Pipeline’s 500 leg in Zone 1. Market demand for direct interconnects with Southern Natural and Texas Eastern will be evaluated as a Phase II project. The non-binding open season for firm storage capacity started May 13 and lasts through June 25. Service requests during this open season will be non-binding on all parties. For detailed information on the open season, visit the storage company’s website at www.caledoniastorage.com.

Shell Exploration & Production Co. last week ramped up production from its joint venture Llano field in the Gulf of Mexico, located about 200 miles southwest of New Orleans in 2,600 feet of water. The well is producing 26 MMcf/d of natural gas and 10,500 bbl of oil from one well, and a second well is planned to be on production later this month. Shell is operator and holds a 26.5% interest, Amerada Hess a 50% interest and ExxonMobil Corp. holds the remaining 22.5% interest. The field, which is located in Garden Banks 385 and 386, produces through an 11.5 mile sub-sea flowline to Shell’s Auger Platform. Processing capacity of 25,000 bbl/d and 75 MMcf/d is reserved for Llano. The subsea system consists of two wells tied back to Auger via a pipe-in-pipe looped flow line. Llano is Shell’s second project to use 15,000 pounds per square inch (psi) subsea equipment. Total development costs were approximately $215 million, and the project was completed on time and within the allocated budget.

Vancouver-based Valkyries Petroleum Corp. said initial test results for its Canales No. 1 well drilled on the Tiara prospect in South Texas is flowing 2.7 MMcf/d and 70 bbl of condensate a day. The well spudded in mid-April and reached final depth of 9,100 feet in early May. The well will be tied into nearby production facilities, and a full field appraisal program will be carried out over the next few months. Valkyries holds a 20.63% working interest in the Canales No. 1 well. Preparations are under way to drill an offset well in which the company will have a 37.5% working interest. Valkyries also reported that a private placement announced in March has closed. The placement raised gross proceeds of C$2.25 million through the sale of one million units at C$2.25/unit with each unit consisting of one common share of Valkyries and one-half of a share-purchase warrant. Proceeds will be used for general working capital purposes.

The record pace of drilling in Canada has finally started to pay off. Canada’s National Energy Board (NEB) reported that natural gas exports to the United States through February of this year were up 1.3% to 626.5 Bcf, or about 10.44 Bcf/d, compared to 618.7 Bcf, or 10.31 Bcf/d, over the same period in 2003. The NEB said the biggest volume increase was to the California market where exports jumped 23%. Volumes to the Pacific Northwest rose 15%. Exports to the Northeast and Midwest fell by 7% and 0.8%, respectively. Gas exports in the month of February totaled 303.7 Bcf compared to 291.7 Bcf in February 2003. During 2003, exports fell to 3.5 Tcf, their lowest level since 1999 when exports were 3.37 Tcf. The U.S. Energy Information Administration expects gross pipeline imports to fall this year to 3.28 Tcf from 3.42 Tcf in 2003. Meanwhile, Lehman Brothers analyst Thomas Driscoll said on Tuesday that he expects Canadian gas production to rise 1.2% this year to 16.6 Bcf/d. Driscoll said first quarter Canadian production was flat at 16.5 Bcf/d based on a survey of 14 major gas producers.

Panhandle Eastern Pipe Line has extended an open season for a proposed pipeline expansion and extension of its Muncie Lateral until June 11. The company is planning to add 500 MMcf/d of firm transportation capacity on the lateral in Ohio and will extend the line from Grant County, IN, to Cincinnati with 124 miles of 30-inch diameter pipe. The project is designed to carry more western and southwestern supplies eastward. It would increase access to gas supply from the Midcontinent, the Rockies, the Gulf Coast and from Trunkline LNG’s liquefied natural gas (LNG) import terminal in Lake Charles, LA for customers in the Midwest and along the East Coast. The project would provide additional transportation capacity to Dayton, Cincinnati and East Coast markets through connections at Lebanon, OH, to Texas Eastern Transmission, Columbia Gas Transmission and Dominion Transmission. It is planned to be in service by November 2006. Previously the open season was scheduled to end on May 14. Open Season documents can be obtained by calling either Jim Van Matre at (713) 989-7625 or Gregg Russell at (713) 989-7624.

Duke Energy Field Services (DEFS) closed the purchase of 1,000 miles of gathering pipeline, the 75-mile Raptor intrastate pipeline system, as well as processing assets in southeast New Mexico from ConocoPhillips for $74 million. The assets include the Hobbs, Antelope Ridge and Zia processing plants with total capacity of 112 MMcf/d. “These assets acquired from ConocoPhillips allow DEFS to capture synergies from our existing asset base in southeast New Mexico,” said DEFS Chairman Bill Easter. “They will further enhance our ability to gather and process all types of gas, improve system flexibility and increase service offerings for our customers.”

Enbridge Energy Partners said it has purchased the right of way and awarded the pipeline contract for a new 107-mile, 36-inch diameter East Texas expansion project that is scheduled to be built starting this fall. The 500 MMcf/d pipeline will originate at the partnership’s existing facilities near Bethel in Anderson County and will terminate at the Enbridge Carthage Hub in Panola County. It is designed to relieve transportation constraints now faced by producers from regional plays, including the Bossier Sands and Barnett Shale. “We are impressed with the strong support received from producers in the region for construction of this strategic link to key markets served by the Carthage Hub,” said Enbridge Energy Co. President Dan C. Tutcher. “With this level of commitment, we are confident that this new transmission pipeline, to be constructed just south of our existing East and Northeast Texas systems, will quickly provide economical and direct access to markets through both the Carthage Hub and other interconnections in the region.” The construction contract was awarded to IPSCO Inc. The anticipated in-service date for the pipeline is June 2005. Existing shippers and potential customers seeking additional information about the expansion should contact John Loiacono at (713) 821-2068 or Steve Marsh at (713) 821-2084.

Trinidad’s Energy Minister Eric Williams told Reuters New Service this week that Trinidad and Tobago is considering investing in a liquefied natural gas (LNG) import terminal in the United States. He did not say whether an existing or proposed terminal was being considered. Trinidad is the largest supplier of LNG to the United States. The Atlantic LNG joint venture, which includes The National Gas Company of Trinidad, BP, BG Group, Repsol and Tractebel, currently has three LNG supply trains operating and a fourth under construction. Trinidad and Tobago produces about 2.8 Bcf/d currently, and the government expects output to rise to about 3 Bcf/d by the end of the year.

Murphy Oil Corp. announced that its first quarter net income will average 90 cents to $1.10 per share, lower than expected, but the El Dorado, AR-based producer said production in the quarter will be slightly higher, averaging 136,500 boe/d. Sales volumes for the quarter will average 136,000 boe/d, lower than expected because of lower sales volumes in Malaysia. Canadian Natural Resources Ltd. also announced it is working to acquire some of Murphy’s Canadian natural gas assets, which are estimated to be worth C$260 million ($193 million). Pengrowth Energy Trust already has agreed to buy some of Murphy’s remaining Western Canadian Sedimentary Basin assets for C$550 million. The assets include interests in the west central and Peace River Arch areas (including McLeod, Deep Basin and Peace River Arch interests); southern Alberta (including interests in Countess, Princess and Twining/Three Hills); and heavy oil interests (including properties in Lindbergh, Tangleflags and Lloydminster areas). Canadian Natural said the assets it wants to purchase produce about 40 MMcf/d. The transaction would increase its 2004 oil and gas production about 2%, according to the company. Some of the properties are subject to rights of first refusal, which means the outcome of the bid is uncertain.