Gulf Canada, KeySpan form midstream JV

Gulf Canada Resources Ltd., Calgary, and KeySpan Energy Corp., Hicksville, N.Y., have agreed to form a natural gas midstream services partnership in Western Canada. The 50-50 joint venture will be called Gulf Midstream Services (GMS). It will include virtually all of Gulf Canada's interests in gas gathering, processing, storage, and transportation facilities, in addition to Gulf's natural gas and gas products marketing business.

Nov. 9, 1998

2 min read

Gulf Canada Resources Ltd., Calgary, and KeySpan Energy Corp., Hicksville, N.Y., have agreed to form a natural gas midstream services partnership in Western Canada.

The 50-50 joint venture will be called Gulf Midstream Services (GMS). It will include virtually all of Gulf Canada's interests in gas gathering, processing, storage, and transportation facilities, in addition to Gulf's natural gas and gas products marketing business.

Under terms of the agreement, KeySpan unit KeySpan Energy Development will acquire from Gulf a 50% interest in GMS for $290 million (Canadian) in cash. KeySpan also will provide a 3-year, $100 million loan at commercial terms. Gulf will have the option to repay the loan or allow KeySpan to take an additional 19.7% interest in GMS.

KeySpan also agreed to fund as much as $27.5 million of Gulf's share of the capital expenditures of GMS during the next 3 years in exchange for a preferential share of GMS's cash flow.

The new firm

GMS will operate as an independent business and offer the region's gas producers "a full range of midstream services, from wellhead to customer," said Gulf Canada.

The JV's assets will include interests in 14 gas processing plants and associated gathering systems. The plants have a total feed capacity of more than 1.4 bcfd, about 750 MMcfd of which is net to GMS. Other facilities include liquids fractionation, storage, and transportation facilities at Edmonton.

GMS will provide gas gathering/ processing services to Gulf and market Gulf's Western Canadian gas and sulfur production. It also will purchase all of Gulf's NGL output.

Employees of Gulf's midstream services division will staff the new JV.

GMS Pres. Jim Bertram said the new firm will combine Gulf's assets, people, and marketing experience with KeySpan's resources and knowledge of gas transportation and end-user markets.

KeySpan Energy Chairman Robert B. Catell said the combine "fits perfectly with our plans to actively participate in the management and growth of strategic assets in the Gulf of Mexico and Canada."

The firms hope to dramatically expand their combined natural gas midstream businesses.

Gulf Canada Pres. and CEO Richard Auchinleck said, "This alliance will allow us to aggressively grow the midstream business and will support our active gas-oriented exploration program in Western Canada."