Shell Exploration & Production Co. agreed to sell its 80% interests in Shell CO2 Co. Ltd.-the largest US transporter and marketer of carbon dioxide-for $185.5 million to Kinder Morgan Energy Partners LP, which already holds the other 20%.
With the pending sale of Shell's 36% interest in Altura Energy LP (see story, p. 29), Shell CO2 is no longer a core business or strategic fit, officials said.
Altura is a limited partnership formed by the 1997 combination of Amoco Corp. and Shell properties in the Permian basin. Half of Altura's current production comes from large CO2 injection projects, which has earned the partnership the reputation as the best and biggest operator of CO2 floods.
The Shell CO2 acquisition represents about 20% of Kinder Morgan's stated goal of $1 billion/year in midstream acquisitions. It is expected to be immediately accretive to Kinder Morgan unitholders at more than 15¢/unit, officials said.
Shell has a 78% limited partnership interest and a 2% general partnership interest in Shell CO2, which produces, markets, and transports CO2 for enhanced oil recovery projects in the western US.
That partnership's assets include more than 5 tcf of net CO2 reserves in the McElmo Dome and Doe Canyon fields in Colorado and the Bravo dome in New Mexico.
It also has the most extensive CO2 pipeline network in the industry, with more than 900 miles of pipelines. It owns the Central Basin pipeline and significant interests in the Cortez and Bravo pipeline systems, which transport CO2 to West Texas and New Mexico.
As operator, Shell's share of present CO2 production from the McElmo Dome near Cortez, Colo., is about 400 MMcfd. That gas is transported through a 500-mile pipeline to EOR projects in the Permian basin.
The Permian basin in West Texas and New Mexico produced about 1 million b/d of oil in 1998, about 20% of total oil production from the Lower 48. More than 15% of its output was attributable to CO2 flooding.
"Going forward, we believe there are many opportunities to continue to grow the CO2 business, both within the Permian basin and other market areas," said Richard D. Kinder, chairman and CEO of Kinder Morgan Energy Partners. Other markets for CO2 include Colorado, Utah, Kansas, Oklahoma, and New Mexico's San Juan basin.
Since 1983, Shell has produced more than 3.3 tcf of CO2 from the McElmo dome.
Shell CO2 employs about 35 people in Houston and Midland, Tex.; and in Cortez. Kinder Morgan says it will offer jobs to as many of those employees as practical.