Houston-based Texas Municipal Gas Corp. (TMGC) has purchased $266 million of West Texas mineral interests from Dominion Exploration & Production, which would give it 66 Bcf for the next four years. The assets currently produce more than 200 MMcf/d.

The Dominion Resources subsidiary would give TMGC a term overriding royalty interest, or volumetric production payment, in more than 3,200 producing wells. Dominion also would continue to operate the properties and would retain all future excess production derived from the existing wells and from property development. The gas would be transported to the Houston Ship Channel for delivery to the participating municipalities.

Bob Murphy, TMGC’s executive director, said the agreement would give TMGC “significant, reliable gas volumes to meet the requirements of its current participants while also enabling it to responsibly grow.” Participating cities, he said, will save between 20-25 cents/Mcf.

TMGC now has completed two long-term natural gas supply contracts with systems across Texas, both in the gas distribution business and power generation. Going forward, the corporation wants to complete some deals with longer-lived onshore gas properties and plans to extend its reach to nearby producing states, including Louisiana and Oklahoma.

TMGC was organized in 1996 to finance the acquisition of mineral interests for participating Texas municipal utilities. Its gas acquisition program is managed by Municipal Energy Resources Partners Ltd. through its general partner, Municipal Energy Resources Corp., both based in Houston.

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