Midstream News

Dec. 1, 2007

Marathon purchases CITGO terminals, pipeline interest in Ohio

Marathon Oil Corp., through a wholly-owned subsidiary, has reached an agreement to purchase four terminals in Ohio and the ownership interest in Inland Pipeline from CITGO Petroleum. Doug Sparkman, Marathon senior vice president of transportation and logistics said, “It demonstrates Marathon’s commitment to making quality fuels available to our customers by opening new market opportunities in Dayton and Tallmadge, as well as new pipeline markets.” Assets include four product terminals located in Dublin, Dayton, Oregon (Toledo) and Tallmadge, Ohio, and CITGO’s ownership interest in Inland Pipeline, a petroleum product pipeline with origin points in both Lima and Oregon that supplies Dublin, Dayton, Oregon, Cleveland, Tallmadge, and Canton, Ohio. Terms were not disclosed.

The company has also approved a projected $1.9 billion expansion and heavy oil upgrade project at the company’s Detroit, Mich. refinery. The project will increase the refinery’s heavy oil processing capacity, including Canadian bitumen blends, by about 80,000 bpd, and will increase its total crude oil refining capacity by about 15%, from 100,000 bpd to 115,000 bpd. When completed in late 2010, the project will add more than 400,000 gallons of clean transportation fuels per day to the marketplace. Construction is expected to begin in late 2007 or early 2008, subject to obtaining the necessary permits from applicable regulatory agencies.

In addition, an associated pipeline project in six Monroe County, Mich. townships and one township in Wayne County will create hundreds of temporary construction jobs for the duration of the installation. Construction on the 29-mile segment of pipeline is expected to begin in mid-2009 with completion in 2010.

Falcon Gas Storage commences Worsham-Steed operation in North Texas Barnett shale

Houston-based Falcon Gas Storage Co. Inc.’s wholly-owned subsidiary NorTex Gas Storage Co. LLC, has started flowing gas through its newly constructed Worsham-Steed Pipeline, a 60-mile, 24-inch high pressure gas pipeline located in the western portion of the Barnett shale gas play in North Texas. Initial flow rates have ranged from 150,000 - 200,000 Mcfd and are expected to increase as gas injection activity accelerates at the company’s Worsham-Steed Gas Storage Facility.

Traversing through Jack, Parker, and Hood counties, the pipeline has a capacity of 450,000 Mcfd that can be expanded to 650,000 Mcfd. The pipeline connects with Energy Transfer’s “Old Ocean” pipeline, Enterprise Product’s and Energy Transfer’s “North Texas Pipeline,” and Atmos Energy’s “Line X” pipeline. Falcon plans to connect the pipeline with a total of 10 pipelines in the North Texas/Barnett shale market area.

The Worsham-Steed facility, which began accepting gas for injection this month, complements the 10.5 bcf of working gas capacity and over 500,000 Mcfd of deliverability from Falcon’s companion Hill-Lake Gas Storage Facility in Eastland County, Tex.

In addition to providing transportation capacity for gas storage services, the pipeline is available for standalone gas transportation services with additional gas transportation capacity of up to 150,000 Mcfd for Barnett shale gas producers and processors.

Enbridge Energy proceeds with second North Dakota Pipeline System expansion

Enbridge Energy Partners LP will proceed with another expansion of the Enbridge North Dakota Pipeline System adding up to 51,000 bpd of capacity, subject to approval by the US Federal Energy Regulatory Commission and state regulatory authorities. The expansion, with an estimated cost of roughly $150 million, will add 40,000 bpd of capacity from the western end of the system to Minot, ND and 51,000 bpd of capacity from Minot to Clearbrook, Minn. This will increase total system capacity from 110,000 bpd to 161,000 bpd, with an in-service date of late 2009.

This new expansion project is in addition to the existing 30,000 bpd expansion project that is under construction and targeted for completion by the end of 2007. “We have responded to our customers’ transport needs and modified our proposed expansion project. This approach, which still requires shipper support, is designed to benefit regional crude oil explorers, gatherers and producers, as well as refiners, by helping relieve a petroleum transportation bottleneck within the region,” observed Brian Johnson, Enbridge North Dakota region manager.

Quest Midstream to buy Kansas gas pipeline system

Quest Midstream Partners LP has agreed to acquire the Kansas Pipeline natural gas system from Enbridge Energy Partners LP for $133 million. Quest Midstream is a subsidiary of Quest Resource Corp. The pipeline extends from three laterals in northeastern and northwestern Oklahoma and central Kansas to serve Wichita and Kansas City. The system includes 1,120 miles of pipeline and three compressor stations. Quest Resource is a gas producer operating in the Cherokee basin in southeast Kansas and northeast Oklahoma. The company is increasingly focusing on coalbed methane.

Targa Resources Partners increases, amends credit facility

Targa Resources Partners LP has received commitment letters from new and existing lenders in excess of the previously requested $250 million increase. Total commitments under the partnership’s credit facility will increase from $500 million to $750 million, subject to standard closing conditions. Additionally, the partnership has received approval, after the current increase becomes effective, for an amendment to the credit facility for an increase in the total commitments to up to $1 billion upon receipt of commitments to such increases in the future.

Targa Resources Partners was recently formed by Targa Resources Inc. to engage in the business of gathering, compressing, treating, processing, and selling natural gas and fractionating and selling natural gas liquids and natural gas liquids products. The partnership operates in the Fort Worth basin in north Texas. A subsidiary of Targa is the general partner of the partnership. Targa Resources Partners owns an extensive network of integrated gathering pipelines, two natural gas processing plants, and a fractionator.

Copano Energy closes Cantera Natural Gasacquisition, related financings

Houston-based Copano Energy LLC has closed its previously announced acquisition of Denver-based Cantera Natural Gas LLC for $612.6 million in cash (including $50.1 million of estimated net working capital and other closing adjustments) and 3,245,817 Copano Class D units issued to the seller in a private placement. Cantera’s assets consist primarily of a 51.0% managing member interest in Bighorn Gas Gathering LLC and a 37.04% managing member interest in Fort Union Gas Gathering LLC, which operate natural gas pipeline systems in Wyoming’s Powder River basin. The cash portion of the acquisition price was funded through a previously announced $335 million private placement of equity securities, and borrowings under an expanded $550 million revolving credit facility led by Bank of America NA.

Spectra Energy receivesFERC approval to increase capacity at Egan facility

Spectra Energy’s Egan Natural Gas Storage Facility received approval from the Federal Energy Regulatory Commission (FERC) to increase the working capacity of its existing salt cavern storage field, located in Acadia Parish, La., by 8 bcf. Egan is expected to complete a previously authorized expansion to 24 bcf in 2008 and reach 32 bcf by the summer of 2012. Spectra Energy has a 50% ownership interest in the Egan storage facility, and Spectra Energy Partners owns the remaining 50%.

ONEOK Partners completes NGL Pipeline acquisition

ONEOK Partners LP has completed the purchase of an interstate natural gas liquids (NGL) and refined petroleum products pipeline system from a subsidiary of Kinder Morgan Energy Partners LP for approximately $300 million. The system extends from Bushton and Conway, Kan., to Chicago, Ill., and transports, stores, and delivers a full range of NGL and refined products. These assets directly link the company’s existing Mid-Continent NGL assets to markets in the upper Midwest. The acquisition also represents the partnership’s first step into the refined petroleum products market.

ONEOK Partners will operate the pipeline system spanning more than 1,600 miles, with a capacity to transport up to 125,000 b/d. More than 90% of the revenues associated with this system are fee based, primarily generated from transportation tariffs. Also included in the purchase is 50% ownership of the Heartland Pipeline Co. ConocoPhillips owns the other 50% and is the managing partner. Additionally, ONEOK Partners plans to build the 440-mile Arbuckle Pipeline from southern Oklahoma through the Barnett shale natural gas play in northern Texas and continuing on to the Texas Gulf Coast. The partnership also is investing $216 million to upgrade its existing NGL infrastructure.

Wolverine deploys PipelineTransporter from EnergySolutions

Energy Solutions International Inc., the Houston-based global supplier of oil and gas pipeline management software, has deployed its PipelineTransporter-Liquids scheduling application at Wolverine Pipe Line Co. of Michigan.

Wolverine’s pipeline system consists of more than 1,000 miles of various-sized pipe and pumping stations delivering a multitude of products to customers in Michigan, Illinois, and Indiana. PipelineTransporter for Liquids replaces an incumbent solution to manage Wolverine’s liquid pipeline transportation, storage, and delivery.

PipelineTransporter for Liquids is a scheduling solution that addresses the challenges of moving vast amounts of crude oil and refined products through the world’s pipelines. It provides schedulers with the tools and information necessary to plan efficiently and ensure timely delivery of products, including product movements on batched pipelines.