Williams presses power, petrochemical diversification strategy

Tulsa-based integrated energy firm Williams has formed some innovative agreements that are furthering its diversification into the power and petrochemical sectors.

In an arrangement that may prove to be an indicator of future trends, Williams has signed a fuel supply and power marketing agreement with AES Corp., Arlington, Va. Under this second such deal with AES, Williams will supply natural gas to the firm for use in an AES generation unit and will market the plant's electricity output.

Meanwhile, Williams Distributed Power Services has signed an agreement with Powercell Corp., Cambridge, Mass., under which Williams will distribute and utilize Powercell's products in its power services business. Williams will use the products to promote its services on power quality and reliability issues.

In the petrochemicals arena, Williams has signed an agreement with ARCO to purchase Union Texas Petrochemicals Corp., which ARCO obtained as part of its acquisition of Union Texas Petroleum Holdings Inc. in June 1998.

AES deal

Williams has agreed to supply fuel to and market the output from 700 MW of electricity generating capacity AES will build in South Lebanon Township, Pa.

Williams will supply natural gas to AES for use in a gas-fired combined-cycle power plant. Construction of AES's Ironwood plant at South Lebanon is slated to begin by the end of this quarter. The power will be sold in Pennsylvania, New Jersey, and Maryland. Start-up is scheduled for second quarter 2001.

The deal is the second such joint project between Williams and AES. In May, the firms made a similar agreement under which Williams supplies fuel to and markets output from three AES power plants in Southern California, with a combined capacity of 4,000 MW.

Powercell contract

Williams Distributed Power Services has signed an agreement with Powercell giving Williams "certain exclusive rights" to distribute and use Powercell's products to offer products and services in the areas of distributed electric power generation, thermal energy, power quality, and energy storage. The products and services are designed specifically for customers seeking to reduce energy costs, improve power quality and reliability, or obtain onsite power at commercial, industrial, or remote locations.

Powercell manufactures the PowerBlock Premium Power System, which combines a proprietary power-management module with a recyclable, advanced-battery energy storage unit called Zinc-Flow. Its applications include uninterruptible power supplies, peaking, load-leveling, and other distrubuted resource uses.

Williams says the alliance will give its customers high-quality, reliable power choices using grid, onsite generation, or stored power. Under the accord, Williams's customers will be able to obtain equipment through Williams for their own use, and resellers can lease units to provide new services to their customers.

UTP acquisition

Williams's acquisition of Union Texas Petrochemicals includes: a 42% interest in a 1.25 billion lb/year ethylene plant at Geismar, La.; a 215-mile light hydrocarbons transportation system in Louisiana; and an 85-mile olefins pipeline and storage network in Louisiana.

"UTP has pipeline and storage assets that provide a solid framework around which Williams can continue to strengthen its NGL transportation, marketing, and distribution network," said Steve Malcolm, president and CEO of Williams Energy Services.

"Our Discovery project has recently been completed, which includes a cryogenic plant at Larose (La.) and a fractionation facility at Paradis, La. Williams is also developing infrastructure in the Mobile Bay area, with an NGL pipeline system running from Alabama across Southern Mississippi into Louisiana."

From ARCO's perspective, the sale allows it to focus on its core oil and gas business. In the last 2 years, ARCO sold its interests in ARCO Chemical Co. and Lyondell Petrochemical Co., as well as its U.S. coal operations.

"As a result of these prior transactions and today's divestiture," said ARCO Pres. and COO Michael E. Wiley, "our capital is now almost entirely directed toward worldwide oil and gas exploration and production and domestic petroleum refining and marketing."