Williams Partners to buy Williams's gulf olefins business

Williams Partners LP, Tulsa, will buy the 83% undivided interest owned by Williams Cos. Inc. in the Geismar, La., olefins production plant, the partnership has announced. It also will pay more than $2.2 billion for Williams’ refinery-grade propylene splitter and $100 million for pipelines along the Gulf Coast.

Williams Partners takes on responsibility for completing the ongoing expansion at Geismar, projected to cost $270 million and pipelines projected to cost about $160 million (OGJ Online, Apr. 10. 2012; Jan. 4, 2012).

Located south of Baton Rouge, the Geismar plant is an NGL cracker currently handling 39,000 b/d of ethane and 3,000 b/d of propane and producing 1.35 billion lb/year of ethylene, said the partnership announcement. The expansion will increase ethane consumption to a maximum of 57,000 b/d and ethylene production capacity by 600 million lb/year to 1.95 billion lb/year. Williams Partners' overall undivided ownership interest following the expansion will be about 88%.

The pipelines in the transaction include a 212-mile ethane connection between Lake Charles, La., and Geismar, a 3-mile propane pipeline, a 50-mile pipeline between Port Arthur, Tex., and Lake Charles, and 60 miles of product pipelines in and around the Houston Ship Channel.

Williams has agreed to waive temporarily about $16 million/quarter of general partner incentive distribution rights until Dec. 31, 2013, or 30 days after the Geismar expansion is operating, whichever is later. Williams estimates the foregone distribution rights will last about 5 quarters, which would total $80 million. The partnership expects the expansion to be completed in 2013.

It said adding olefins production to its business would “bring more certainty to cash flows that today are exposed to the market for ethane,” which Williams Partners expects to be volatile as feedstock demand for infrastructure “lags new supplies from shale-gas production.”

Williams currently owns approximately 66% of Williams Partners, including the general-partner interest. Following the closing of this transaction this month, Williams will own about 70% of Williams Partners, including the general-partner interest.

Adding the Geismar plant to “Williams Partners' portfolio immediately reduces the partnership's exposure to the over-supplied ethane markets by nearly 70% and eliminates it by 2014, while increasing our ability to produce globally marketed ethylene," said Alan Armstrong, chief executive officer of the general partner of Williams Partners.

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