The Williams Companies Inc. made clear its plans to be a seriouscontender in the Canadian midstream market with an announcementlast week 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, according to Williams.

“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 several newtransactions the Canadian pipeline announced it has negotiated withcompanies to sell off the bulk of its remaining gas liquids andextraction, and gathering and processing assets in western Canada.Most of the asset sales (excluding Williams and two others) areexpected to be completed next month, TransCanada said. All of thesales will net TransCanada $1.15 billion.

Included in the $1.15 billion amount were TransCanada’s sales ofits ownership interests in its East Crossfield gas plant in Calgaryto Mobil Oil Canada Ltd., and in its Mosquito Creek, Parkland andVulcan gas processing facilities in Alberta to AltaGas Service Inc.These transactions closed last month.

Based on prior sales and the new sale agreements, Calgary-basedTransCanada estimated that it has achieved about 80% of itsintended goal to divest $3 billion of 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 in excess of2.5 Bcf/d; Empress V plant in Alberta, which is currently underconstruction; the Younger NGL extraction plant in British Columbia,with gas processing capacity of 750 MMcf/d and liquids productioncapacity of 32,000 b/d; and the West Stoddart processing plant inBritish Columbia, with capacity of 120 MMcf/d.

Williams purchased TransCanada’s 100% ownership interests 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.

Aside from its deals with Williams, Mobil and AltaGas,TransCanada has entered into agreements with other purchasers tosell its: 100% interest in its Zama-area sour gas processing plantand associated gathering system in Alberta; 100% interest in itsCentral Foothills gas gathering system in Alberta; 100% interest inits Columbia-Minehead gathering system in Alberta; about 98%interest in its Cutbank sweet gas processing plant and associatedgathering system; and 52% interest in its Clear Hills sour gasprocessing plant and associated gathering network. TransCanadawould not disclose the identities of the parties with whom it hasreached agreements, saying they would be revealed when the salesclose, which is expected to occur in late September.

TransCanada said some of the midstream assets still to be soldinclude: Cancarb Ltd. (a thermal carbon black manufacturingbusiness) and its Alberta-to-Illinois Express oil pipeline. Also itwants to shed a number of non-core international assets: a gaspipeline system, gas treatment plant and offshore gas producinglicenses in the Netherlands; a gas pipeline in Colombia; Accrovengas liquids extraction facility in Venezuela; GasPacifico gaspipeline from Argentina to Chile: and a gas pipeline in Mexico. Itnoted it hopes to sell most of these assets by the end of the year.

Susan Parker

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