Houston Chronicle: Shell unloading gas pipelines in the Gulf: Enbridge to pay $613 million for high-return area: “Included in the purchase are Shell's 50 percent interest in the Stingray pipeline, 80 percent interest in Garden Banks, 50 percent in the Nautilus pipeline, 100 percent of Mississippi Canyon, and 33.3 percent interest in the Destin line.” (ShellNews.net) 18 Nov 04
By NELSON ANTOSH
Shell is selling its interests in pipelines carrying about half the natural gas produced in the deep waters of the Gulf of Mexico for $613 million to Canadian pipeline company Enbridge.
The deal for Shell's joint venture interests in 1,482 miles of pipelines will give Enbridge a big chunk of the pipeline business in deeper waters, where output of natural gas is on the increase.
This will immediately establish Enbridge as a major natural gas transporter in the Gulf, according to Enbridge President and CEO Patrick Daniel, who describes the deep Gulf as a key region for growth because of a significant potential for undiscovered gas reserves.
The lines are located within four major pipeline corridors off the Louisiana coast, and one corridor off Mississippi. These 11 transmission lines and gathering systems extend into waters 4,000 and 5,000 feet deep, with sections still under construction.
In addition to putting the company close to big deep-water gas prospects, it opens the possibility of handling the output of the LNG regasification facilities that are proposed in the Gulf, said Enbridge official Dan Tutcher in Houston.
Shell's exploration and production business will become a customer of Enbridge, it said, retaining long-term access to the pipelines under current contracts. In the statement announcing the sale, Catherine Tanna, Shell Gas & Power's Director for the Americas and Africa, said the sale "enables us to focus on our core upstream activities in the Gulf of Mexico."
Enbridge will take over as commercial manager and field operator for most of the pipeline systems in the deal. Meanwhile, it will hire the Shell management team and staff working with the pipelines, who will relocate from Shell's Houston office to Enbridge's Houston office.
This will bring the total in the Houston Enbridge office to about 300 from the 80 or 90 it started with as the result of a 2001 acquisition, said local spokesman Larry Springer.
Enbridge currently has only two relatively small pipelines in the Gulf, said Springer — the Utos system off Cameron Parish, La., and the Seacrest system off Brazoria County.
While Enbridge Inc. is based in Calgary, most of its assets are in the United States. Its natural gas operations are centered in Houston and are headed by Tutcher, who is Enbridge Group vice-president, transportation south.
Technically, a wholly owned U.S. subsidiary of Enbridge will purchase 100 percent of Shell Gas Transmission LLC from Shell US Gas & Power LLC. The transaction is expected to close by the end of this year.
Included in the purchase are Shell's 50 percent interest in the Stingray pipeline, 80 percent interest in Garden Banks, 50 percent in the Nautilus pipeline, 100 percent of Mississippi Canyon, and 33.3 percent interest in the Destin line.
All are natural gas transmission systems regulated by the Federal Energy Regulatory Commission. The Destin pipeline is the biggest of those five, measured by length and capacity, with BP owning two-thirds.
Also being acquired are six deep-water gas gathering systems including new lines and extensions under construction, scheduled for completion in 2005 and 2006, serving major oil companies and large independents.