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El Paso unit buys majority stake in Elba Island terminal, line

Warren R. True
Chief Technology Editor-LNG/Gas Processing

HOUSTON, Mar. 25 -- El Paso Pipeline Partners LP will pay $810 million for a 51% interest in both Southern LNG Co. LLC and El Paso Elba Express Co. LLC to El Paso Corp.

Southern LNG owns the Elba Island LNG terminal near Savannah, Ga. El Paso Elba Express owns the Elba Express Pipeline that went into service on Mar. 1. El Paso will continue to own the remaining interests of each company.

The company said the sale will close in the next few days and is being funded with $236 million in proceeds from the partnership's recent equity issuance, $149 million of equity from issuance of more than 5.3 million common units to El Paso Corp., a $3-million general partner capital contribution, and new debt.

East Coast terminals
The terminal is one of four land-based LNG receiving terminals on the US East Coast. The most recent—Canaport at St. John, NB—opened last year. In addition, two offshore buoy-based connections in Boston Harbor can receive regasified LNG from specially built regasification and storage vessels.

The Elba Island terminal currently has 1.8 bcfd in sendout capacity and 7.3 bcf of storage capacity in 4 tanks. Expansion, set for commissioning this summer, will add 4.2 bcf of storage in a fifth tank.

The company said the terminal is fully contracted under agreements with subsidiaries of Shell Oil Co. and BG Energy Holdings Ltd. for more than 20 years. BG has an option to expand the terminal to 15.7 bcf of storage and 2.1 bcfd of peak sendout capacity.

The terminal was built in the late 1970s, then decommissioned and mothballed in 1980. It reopened in 2000 as US markets appeared likely to be undersupplied by declining conventional production of natural gas and by projected declines in gas imports from Canada.

It and the other North American terminals now look under threat from the unexpected and rapid expansion of natural gas supplies unlocked by technological advances in drilling and producing from unconventional gas plays, especially shale.

Pipeline
Elba Express Co. owns a 36-in. and 42-in., 190-mile interstate gas pipeline with current capacity of 945 MMcfd that is fully subscribed for 30 years with a unit of Shell.

The pipeline runs from its connection to the LNG terminal near Port Wentworth, Chatham County, Ga., to interconnections with Transco Pipeline on the east and west sides of the Savannah River in Anderson County, SC, and Hart County, Ga.

Elba Express is designed to flow gas bidirectionally from Elba to Southern or Transco, from Southern to Transco, and from Transco to Southern, according to the company’s description.

A BG unit has fully contracted, under a 25-year contract, for a $30 million compression expansion of the pipeline that will increase capacity to 1.165 bcfd and could be in service as early as January 2014, said the company.

Contact Warren R. True at warrent@ogjonline.com.


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