Williams said Monday it will invest $480 million on the Perdido Norte Project in the deepwater Gulf of Mexico (GOM) 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 Daily GPI, Oct. 27, 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. To accommodate the new gas production, Williams plans to increase daily capacity at the Markham plant to more than 500 MMcf/d from the existing 300 MMcf/d level.

The 10,500-mile Transco pipeline moves gas from the Gulf Coast to 12 Southeast and Atlantic Seaboard states, including major metropolitan areas in New York, New Jersey and Pennsylvania.

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 producers’ floating production facility to the Hoover Offshore Oil Pipeline System (HOOPS). Through an agreement with a unit of ExxonMobil Pipeline Co., Williams can deliver crude oil to HOOPS for transportation of crude oil from the offshore interconnect 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.

The deepwater GOM is quickly becoming more accessible for producers. The Independence Hub ramped up earlier this month with gas flowing from the first of 15 subsea wells in 10 anchor fields (see Daily GPI, July 23). The collaboration by midstream operator Enterprise Products Partners LP, offshore production contractor Helix and four producers, Anadarko Petroleum Corp., Hydro Gulf of Mexico LLC, Devon Energy Corp. and Dominion Exploration & Production Inc., uses a single platform and export pipe to serve several large natural gas fields in the Eastern GOM deepwater.

Still to come are tests and possible production on the Jack No. 2 well at Walker Ridge Block 758, which is located in 7,000 feet of water and more than 20,000 feet under the sea floor in the Lower Tertiary. Last September, Chevron, Devon and Statoil ASA completed the deepest extended drill stem test in history on the well, and further tests are scheduled in 2008 (see Daily GPI, Sept. 6, 2006).

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