Williams made news both on- and offshore North America last week with two major expansions that would build its natural gas gathering and midstream businesses in both the deepwater Gulf of Mexico (GOM) and in the burgeoning Canadian oil sands.

In the deepwater GOM project, Williams plans to invest $480 million on the Perdido Norte Project to provide natural gas and oil gathering and processing infrastructure for units of Royal Dutch Shell plc, Chevron Corp. and BP plc. The new infrastructure, which Williams will own and operate, will originate at a floating production facility the producers plan to construct in 8,000 feet of water about 220 miles south of Galveston, TX.

Shell Offshore Inc. last October unveiled plans to develop an ultra-deepwater production hub in the GOM to produce and pipe oil and gas from the Great White, Tobago and Silvertip fields in the Alaminos Canyon of the Lower Tertiary trend (see NGI, Oct. 30, 2006). Shell, as operator, envisioned using a spar facility moored in 8,000 feet of water that would be capable of pumping at least 200 MMcf/d of gas and 100,000 bbl/d of oil, or about 130,000 boe/d.

The floating hub, slated to begin operations around 2011, would gather, process and export production within a 30-mile radius. The facility would be moored in Alaminos Canyon Block 857 near the Great White discovery. Jointly owned by Shell (35%), Chevron (37.5%) and BP (27.5%), the hub’s direct vertical access spar would be the deepest in the world, and it would reduce the number and size of facilities and operations required to explore the deepwater frontier. Shell has not provided any cost estimates.

Williams’ infrastructure will include 184 miles of pipeline and expanded natural gas processing capacity. By design, Williams will build capacity to accommodate future production from other Perdido Foldbelt prospects and from potential tie-ins along the new pipeline route. Pipeline construction will begin in January; the expected date for the pipelines and additional processing capacity to be ready to receive production is around the turn of the decade.

<>”Building critical infrastructure for producers in strategic hubs is central to our plans for creating value in the deepwater Gulf of Mexico,” said Alan Armstrong, president of Williams’ midstream gas gathering and processing business. For natural gas, the project includes 107 miles of gas gathering pipe with the capacity to transport 265 MMcf/d of production at a designed quality specification. The pipe will extend from the producers’ floating production facility to Williams’ existing Seahawk gathering system.

Seahawk connects at Brazos Block 538 with a Williams Transco-operated pipeline that transports gas to the company’s Markham, TX, processing plant, which will increase capacity to 500 MMcf/d to accommodate the new gas production.

Williams new installation also will move 150,000 bbl/d of crude oil to Gulf Coast refineries via a planned pipeline and through capacity on an existing third-party system. Williams’ 77-mile oil pipeline route runs from the floating production facility to the Hoover Offshore Oil Pipeline System (HOOPS and then to onshore refineries.

<>”Williams’ Perdido Norte Project will provide our customers in some of the nation’s largest metropolitan markets with the opportunity to access this significant new source of supply,” said Phil Wright, president of Williams’ interstate gas pipeline business. Agreements with the producers will allow Williams to provide services over the life of the reserves for expected oil and natural gas production. Williams will begin collecting volume-based fees for services when production ramps up.

With the Perdido Norte Project, Williams said it will have invested $1.7 billion in deepwater GOM gathering and processing infrastructure since 1997. In addition to the Perdido Norte Project, Williams’ current deepwater GOM projects include expansion of Discovery’s system with Williams’ Tahiti pipeline project for Chevron’s Tahiti discovery in the Central GOM region and installation of export oil and gas pipelines for Chevron’s Blind Faith discovery in the Eastern GOM.

Williams also is considering an expansion of its facilities in Canada to process the significant new source of off-gas associated with Alberta’s growing oil sands production. The company also will study whether to extract high-value ethane from current and future off-gas streams in the same producing area.

Since 2002, Williams has operated two facilities in the heart of Alberta’s oil sands region. Significant amounts of off-gas are a byproduct of the process of upgrading oil extracted from the sand. At its Fort McMurray and Redwater facilities, Williams recovers and purifies natural gas liquids and olefins from the off-gas that are used by the petrochemical industry.

The company plans to evaluate whether to construct a cryogenic processing plant, expanding its existing Redwater fractionator north of Edmonton, and whether to add a de-ethanizer to the Redwater complex. If Williams decides to move forward, operations could begin in stages by 2010 and a new off-gas processing plant could start up in 2012.

“As the only company with facilities in service to recover olefins and natural gas liquids from the Canadian oil sands off-gas, Williams is uniquely positioned to provide these services,” said Williams Vice President Randy Newcomer. “Recovering, rather than burning, the liquids contained in the off-gas not only increases the value of the off-gas, but also results in a significant environmental benefit.”

Williams’ current operations at Fort McMurray and Redwater reduce emissions of carbon dioxide (CO2) in Alberta by about 219,000 tons each year. The operations also cut annual emissions of sulphur dioxide (SO2) by more than 3,200 tons. By processing the off-gas, Williams said its facilities annually prevent the release of CO2 emissions equal to the carbon footprint of 44,000 Albertans.

The contemplated expansion of its off-gas operations and ethane removal would further decrease CO2 and SO2 emissions associated with oil sands production, the company noted.<> Several months of engineering studies are anticipated before Williams moves forward. Corporate approvals and commercial agreements would be completed if the projects are a go.Williams recently signed nonbinding letters of intent specific to expansions it will evaluate. The company’s evaluation of ethane-recovery facilities is the subject of one agreement with NOVA Chemicals Corp.

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