GulfTerra, Valero finalize Cameron Highway oil pipeline agreement

July 14, 2003
GulfTerra Energy Partners LP, Houston, and San Antonio-based Valero Energy Corp. Monday reported the completion of several agreements to form a 50:50 joint venture in the $458 million Cameron Highway oil pipeline project.

By OGJ editors

HOUSTON, July 14 -- GulfTerra Energy Partners LP, Houston, and San Antonio-based Valero Energy Corp. Monday reported the completion of several agreements to form a 50:50 joint venture in the $458 million Cameron Highway oil pipeline project. A $325 million nonrecourse financing for the project was also completed, the companies said.

GulfTerra was formerly known as El Paso Energy Partners LP. The partnership changed its name earlier this year (OGJ Online, May 7, 2003).

Cameron Highway, which was announced in February 2002, will be a 390 mile, 500,000 b/d pipeline constructed from the southern Green Canyon and western Gulf of Mexico areas to refining areas in Port Arthur and Texas City, Tex. "When completed, the pipeline will be one of the largest crude oil delivery systems in the Gulf of Mexico, sized to handle oil movement for the major deepwater trend discoveries, Holstein, Mad Dog, and Atlantis, its initial anchor fields, as well as other deepwater oil discoveries," the companies said.

GulfTerra is to build and operate the pipeline, which is scheduled for completion during the third quarter of 2004.

Deal details
Based on the agreements, Valero will pay GulfTerra about $51 million, which is about 50% of the amount of the capital investment expended to date for the pipeline project. Additionally, Valero will pay a sum of $35 million in participation fees to GulfTerra for developing the project, $19 million of which was paid at closing. Once the system is completed, Valero will pay GulfTerra $5 million. Valero will pay the remaining $11 million by yearend 2006.

Bill Greehey, Valero chairman and CEO, called the project "a very strategic investment for the company." Greehey said that the project would serve as a "great opportunity. . .to secure a stable source of high-quality crude oils at a savings as compared to foreign-sourced alternatives, while enhancing our feedstock flexibility."