The Williams Companies Inc. made clear its plans to be a seriouscontender in the Canadian midstream market with an announcementyesterday that it has reached an agreement to buy most ofTransCanada PipeLines Ltd.’s remaining ownership interests innatural gas liquids (NGL) and extraction facilities and oneprocessing plant, as well as a one-third interest in a keyAlberta-to-U.S. gas liquids pipeline from Dow Chemical Co.
“We have been wading into the Canadian market for some time,”but the agreements with TransCanada and Dow Chemical “allow us todive in,” said Williams spokesman Kelly Swan. He would not disclosehow much Williams Energy Canada Inc., a Williams unit, agreed topay for the midstream and NGL pipeline assets, but he did say itwas “several hundred million.” The sale of TransCanada’s assets isexpected to close in the fourth quarter, while the purchase ofDow’s interest in the NGL pipeline is targeted for completion bythe end of the third quarter, pending regulatory and governmentapprovals.
“This is a key milestone in the life of Williams’ midstreambusiness for three reasons. First, it vaults us into Canada for thefirst time in a prominent way with assets that are located on thedoorstep of the Western Canadian Sedimentary Basin, which is agrowth basin that has tremendous upside potential. Second, theacquisition reinforces Williams’ role as a leading NGL producer inNorth America. Third, the purchase builds upon our acquisition ofMAPCO in 1998 when we added around 10,000 miles of NGL pipes to ourgathering and processing operations,” said Steve Malcolm, presidentof Williams’ Energy Services business, which oversees the company’smidstream operations.
The Williams-TransCanada deal was only one of a number of newagreements the Canadian pipeline announced it has reached withcompanies to shed itself of the bulk of its gas liquids andextraction, and gas gathering and processing assets in westernCanada. Total sale agreements amounted to about $1.15 billion,according to TransCanada.
Based on prior sales and the new sales agreements, Calgary-basedTransCanada estimated that it has achieved about 80% of itsintended goal to divest $3 billion in non-core assets. Thattranslates to about $2.4 billion in asset sales since it began itsdivestiture program last December.
With the purchase of TransCanada’s midstream assets, Williamswill add to its existing portfolio about 6 Bcf/d of gas processingcapacity, 225,000 barrels/day of NGL production capacity, 2,000miles of NGL transportation pipeline and more than five million b/dof NGL storage capacity in western Canada.
Specifically, it has agreed to buy TransCanada’s interests insix facilities — the Cochrane plant in Alberta, with 2.5 Bcf/d ofprocessing capacity; the Redwater fractionation and NGL storagefacility in Alberta, with 65,000 b/d of liquids capacity; EmpressII plant in Alberta, with gas processing capability of 2.5 Bcf/d;Empress V plant in Alberta, which is currently under construction;the Younger NGL extraction plant in British Columbia, with gasprocessing capacity of 750 MMcf/d; and the West Stoddart processingplant in British Columbia, with capacity of 120 MMcf/d.
Williams purchased TransCanada’s 100% ownership interest in theCochrane, Redwater, Empress II and West Stoddart facilities; its50% interest in the Empress V plant, and its 43.3% interest in theYounger facility.
Separately, the Tulsa, OK-company has agreed to buy DowChemical’s 32.5% interest in the Cochin pipeline, a 1,900-mile,12-inch diameter pipeline that transports NGLs and ethylene fromAlberta to destinations in the Upper U.S. Midwest and on toWindsor, ON, with an extension to Sarnia, ON.
The addition of the Cochin pipeline is a “key link” in Williams’strategy to develop a comprehensive transportation, storage anddistribution network to every major NGL market in North America,said Steve Springer, Williams’ vice president and general managerof midstream operations. Armed with the Dow and TransCanadapurchases, Williams is making a “firm commitment to being involvedin western Canada because of the growth projections for gas andliquids production,” he noted.
TransCanada said it also has entered into agreements withseveral other purchasers to sell its: 100% interest in itsZama-area sour gas processing plant and associated gathering systemin Alberta; 100% interest in its Central Foothills gas gatheringsystem in Alberta; 100% interest in its Columbia-Minehead gatheringsystem in Alberta; about 98% interest in its Cutbank sweet gasprocessing plant and associated gathering system; and a 52%interest in its Clear Hills sour gas processing plant andassociated gathering network. TransCanada refused to disclose theidentifies of the parties with whom it has reached agreements with,saying they would be revealed when the sales close, which isexpected to occur in late September.
TransCanada said some of its midstream assets remaining to besold, include Cancarb Ltd. (a thermal carbon black manufacturingbusiness) and its Express System. Also it wants to shed itself of anumber of non-core international assets: gas pipeline system, gastreatment plant and offshore gas producing licenses in theNetherlands; a gas pipeline in Colombia; Accroven gas liquidsextraction facility in Venezuela; GasPacifico gas pipeline fromArgentina to Chile: and a gas pipeline in Mexico. It noted it hopesto have most of these assets sold by the end of the year.
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