NGI The Weekly Gas Market Report
To prepare for El Paso Energy’s looming takeover of CoastalCorp., Westcoast Energy Inc. and Coastal are splitting up EngageEnergy, their three-year-old marketing venture, with each retaininga half interest in the Houston-based gas marketer. The split shouldbe completed by the end of the week.
Coastal, headquartered in Houston, will merge with El Paso Energyin a $16 billion deal by the end of the fourth quarter (see Daily GPI,Jan. 19), and company officials saidthat several transactions needed to be completed before the mergercould be finalized, including dismantling the Engage venture.Vancouver-based Westcoast and Coastal each own 50% interest in Engage,which has 12 regional offices throughout North America and employs300. One of the top North American gas marketers, it purchases naturalgas from every producing basin in North America, and tradeselectricity within all NERC regions. Engage estimates it will addanother 1 Bcf/d to its natural gas deliverability by the end of thisyear.
NGI ranked Engage in 12th place in its 1999 North American powermarketers list, dropping from eighth place in 1998, losing about15.2% in sales. Engage reported a sales volume of 5.6 Bcf/d lastyear, compared with 6.6 Bcf/d the previous year. It sold anestimated 2,100 Bcf of natural gas in 1999.
Westcoast and Coastal formed Engage in 1997 to offer a fullspectrum of energy services, including natural gas marketing andtrading, electricity trading and sales, energy management services,structured storage and transportation-related services, structuredpower and management services and energy risk management services.The companies said that those services would continue as before.There is expected to be little impact on either company’s existingasset valuation.
Under the restructuring plan, Westcoast will retain the EngageCanadian business entity and certain natural gas and poweractivities in the United States. Westcoast also will retain theright to use the Engage Energy name and will continue to conductbusiness from Calgary, Southfield, MI and other U.S. locations.Coastal will retain the U.S. business entity, with headquarters inHouston.
“By taking full ownership of our natural gas and electricitymarketing and trading functions, we can better capitalize on theknowledge, experience, track record and infrastructure that we havebuilt over the past three years,” said Michael Phelps, WestcoastCEO.
When Coastal merges with El Paso, it will be joining a companythat already has a strong gas marketing arm. NGI ranked El Pasoseventh on its list of gas marketers in 1999, noting that it traded6.7 Bcf/d of natural gas last year. It also was ranked seventh in1998.
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