July Newsreel: Crosstex Selling Assets, Jicarilla Apache Make ROW Deal, Most Arctic Natural Gas in Russian Territory

July 2009 Vol. 236 No. 7

Crosstex To Sell Mississippi, Alabama, South Texas Assets For $220 Million
Jicarilla Apache Nation, Enterprise Announce Long-Term Right-of-Way Agreement

Arctic Natural Gas Mostly In Russian Territory, Study Finds
Energy Transfer Technologies Earns Texas Environmental Excellence Award
New Technology Seen As Revolutionizing Gas Pipeline Checks
ABS Gives Preliminary Approval To Second Offshore Gas To Liquids Concept
First Phase Startup Of Anadarko-Woodford Shale Expansion
AGA Recognizes Outstanding Member Companies
NGS Energy Plans Gas Storage Asset Acquisition
ROSEN USA Completes Projects

Crosstex To Sell Mississippi, Alabama, South Texas Assets For $220 Million

Crosstex Energy, L.P. has entered into a definitive agreement to sell its assets in Mississippi, Alabama and South Texas for $220 million to Southcross Energy, LLC, a Dallas-based natural gas transportation and processing company. Proceeds from the sale will be used to pay down more than $200 million of the Partnership’s outstanding debt, which will satisfy the targets for debt reductions in September 2009 and December 2009 established in the Partnership’s recent amendments to its debt facilities. The Partnership expects the sale to close on July 31.

“The sale of our Mississippi, Alabama and South Texas assets enables us to strengthen our balance sheet as we pursue our strategy to increase liquidity, reduce leverage and improve profitability,” said Barry E. Davis, Crosstex President/CEO. “As we have said, asset sales are an important part of our deleveraging initiatives, and we will explore strategic transactions on an ongoing basis that we believe are in the best interests of the company and our stakeholders. We continue to focus on the growth of our strategic assets in North Texas and Louisiana, as well as our Treating business, and remain committed to being a premier provider of midstream energy services.”

“These are perfect assets to provide the foundation of our new company,” said David Biegler, Chairman/CEO of Southcross Energy.

The Mississippi and Alabama systems consist of 780 miles of intrastate gathering and transmission pipelines with throughput capacity of about 185,000 MMBtu/d. The South Texas system consists of 1,400 miles of intrastate gathering and transmission pipelines with throughput capacity of about 600,000 MMBtu/d and two processing facilities with a total processing capacity of 195,000 MMBtu/d. These three systems generated gross margin of $12 million and operating expenses of $4 million for first quarter 2009.

Jicarilla Apache Nation, Enterprise Announce Long-Term Right-of-Way Agreement

The Jicarilla Apache Nation and an affiliate of Enterprise Products Partners L.P. have signed a 20-year right-of-way agreement that will allow the partnership to continue its natural gas gathering operations on reservation lands in northwest New Mexico. Enterprise will continue to own and operate existing infrastructure and related assets located on tribal land, including 545 miles of gathering lines connected to the partnership’s San Juan Gathering system that have current throughput in excess of 30 MMcf/d of natural gas. Comprised of more than 6,000 miles of natural gas pipelines in New Mexico and Colorado, the San Juan system gathers more than 1 Bcf/d of natural gas.

Included in the long-term contract are incentives that could lead to future expansion of the gathering system on Jicarilla land. In addition to a fixed price component, the right-of-way agreement provides the Nation with opportunities to benefit from changing market conditions for energy commodities.

“The Nation’s agreement with Enterprise will stimulate our oil and gas economy while protecting our lands,” said Jicarilla Apache President Levi Pesata. “I’m pleased we reached this mutually beneficial agreement and the Nation looks forward to continuing our work with Enterprise.”

To protect sensitive religious, cultural and pristine sites, a small portion of the 1 million acres that comprise the Jicarilla reservation will be off-limits to oil and gas activity. Also, over the 20-year period of the right-of-way agreement, Enterprise will award 25 college scholarships to tribal members for training and employment opportunities. The partnership will join a committee made up of producers and tribal representatives to maintain a system of access roads serving oil and gas facilities that comply with specific Bureau of Land Management guidelines. The U.S. Department of the Interior has authority for granting final approval of the right-of-way agreement.

Arctic Natural Gas Mostly In Russian Territory, Study Finds

Nearly a third of the natural gas yet to be discovered in the world is north of the Arctic Circle and most of it is in Russian territory, according to a new analysis led by researchers at the U.S. Geological Survey. Alaska also is believed to hold a significant storehouse, according to a report published in the Anchorage Daily News.

“These findings suggest that in the future the … pre-eminence of Russian strategic control of gas resources in particular is likely to be accentuated and extended,” said Donald L. Gautier, lead author of the study published in the journal Science. He noted that Russia is already the world’s leading natural gas producer. The report, by an international scientific team, estimated that the Arctic also contains 3-4% of the world’s oil resources yet to be discovered.

Two-thirds of the undiscovered gas is in just four areas – the South Kara Sea, North Barents Basin, South Barents Basin and the Alaska Platform – the report said. The South Kara Sea off Siberia contains 39% of the Arctic’s undiscovered gas, the researchers said. The Alaska Platform extends from the central North Slope to offshore waters in the Beaufort and Chukchi seas. The report says this portion of Alaska offshore and onshore:

  • Contains an estimated 8% of the Arctic gas, or an estimated 38 Tcf, about as much as has been discovered in the Prudhoe Bay area.
  • Contains more than 31% of the Arctic region’s undiscovered oil, or an estimated 28 billion barrels – not quite twice as much as has been produced from the North Slope since 1977.

Off Alaska’s northern coast, at least two major oil companies – Shell and ConocoPhillips – have sought to explore for offshore oil and gas but have faced opposition from Native communities and environmentalists.

Russia has been active in asserting its claim to parts of the Arctic. It first submitted a claim to the United Nations in 2001 but was rejected for lack of evidence. The United States, Canada, Denmark and Norway have also sought to assert jurisdiction over parts of the Arctic. Russia insists that an underwater mountain range crossing the polar region is part of its continental shelf.

Energy Transfer Technologies Earns Texas Environmental Excellence Award

Dallas-based Energy Transfer Technologies, Ltd has received the 2009 Texas Environmental Excellence Award in recognition of innovative technology to reduce pollution. The award is presented by the Texas Commission on Environmental Quality on behalf of the Texas Senate and House of Representatives.

Energy Transfer Technologies provides a “dual drive” compression concept whereby a combination of gas engines and electric motors are used to move natural gas through pipelines, drastically reducing both emissions and operating costs. Energy Transfer’s ESelect® Dual Drive® patented technology allows its compressors to switch between gas and electricity in response to changes in demand for electricity.

The compressors, which run mainly on electricity, switch to gas engines during peak demand times to help avoid the need to add generating capacity. For each 1,500-hp Dual Drive running on electricity there can be up to a 95% reduction in exhaust emissions along with reductions in noise, waste oil and coolant usage. The same technology can be applied to other industries that pump fluids such as municipal water systems.

New Technology Seen As Revolutionizing Gas Pipeline Checks

Det Norske Veritas (DNV) has joined with Gassco to develop a new acoustic inspection method which allows the internal and external status of gas pipelines to be more accurately characterized. Measurements can now be made without reducing the gas flow, and the net effect is seen as a big improvement in the safety of gas pipelines along with substantially reduced inspection costs.

DNV said this solves a long-standing problem for the oil and gas industry which has previously had to reduce gas flows to check pipelines for possible maintenance requirements. Not only has that imposed considerable expense, but existing inspection methods have not been sufficiently reliable, DNV said. The new method can be used on land and offshore. Attaching a simple “necklace” to a standard cleaning pig will now make it possible to determine the condition through absolute measurements of the whole pipeline surface, said DNV.

Gassco has tested the new technology on one of its gas pipelines. It said that performance has been so good that Gassco and DNV have decided to establish a joint venture to commercialisz the solution.

“For us, this means that inspection and maintenance costs can be sharply reduced while enhancing quality of the inspections,” said Brian Bjordal, president/CEO of Gassco. “Now wall thickness can be measured much more exactly. This technological advance probably has a global market potential.”

ABS Gives Preliminary Approval To Second Offshore Gas To Liquids Concept

ABS has issued an Approval in Principle (AIP) for a second floating Gas to Liquids (GTL) concept and is reviewing several additional GTL concepts from leading energy operators. ABS provided its first AIP for a GTL concept (a floating production barge facility) in 2006. Since then, it has seen a steady increase in requests from designers for review and preliminary assessment of proprietary technologies. Currently there are no GTL plants offshore.

“The marine environment, dynamic loads, impact of sea motions and equipment congestion on the floating structures can be significant for GTL plants. The high temperature and explosion risk of GTL plants need special attention” said Harish Patel, Manager, Emerging Technologies, ABS.

Patel said the emerging trend is the use of small-scale, compact GTL plants offshore. By placing the GTL plant on an existing FPSO, associated gas that would have been flared or re-injected can be converted to a clean, low-sulfur petroleum product or blended into oil, transferred using conventional FPSO handling systems and shuttled ashore using readily available product tanker tonnage. The key is to test minimal-scale GTL plants onshore to verify technology and identify all potential risk. It is estimated more than one-third of global gas reserves are stranded by their location or field size.

First Phase Startup Of Anadarko-Woodford Shale Expansion

DCP Midstream, LLC announced startup of new facilities servicing Anadarko-Woodford Shale resource play development in Oklahoma’s Blaine and Canadian counties. The installation of a new high-pressure booster, with associated gathering and discharge pipelines, is the first phase of DCP Midstream’s continued development in central Oklahoma.

The new facilities complement existing infrastructure and are positioned to expand as development continues. Initially, 15 MMcf/d of capacity will be added and is easily expandable. The new gas volumes will be delivered to DCP Midstream’s Okarche plant for processing and extraction of natural gas liquids.

“Completion of these facilities is the beginning of a series of developments we’re taking to expand our central Oklahoma gathering and processing system and provide reliable service for the growing production from producers in Anadarko-Woodford Shale,” said William Waldheim, group vice president of commercial for DCP Midstream, LLC. “These facilities will enhance the existing gathering system and allow us to better handle the high-volume shale development.”

AGA Recognizes Outstanding Member Companies

The American Gas Association (AGA) has recognized 17 of its member companies for achieving outstanding records of employee safety in 2008. The Safety Achievement Award, presented at AGA’s 2009 Operations Conference and Biennial Exhibition, was given to companies that achieved the lowest “DART” incident rate – a mathematical calculation that describes the number of recordable injuries and illnesses per 100 full-time employees that resulted in days away from work or restricted work activity.

Additionally, several AGA member companies earned the Vehicle Safety Achievement Award by experiencing the lowest motor vehicle accident rate for companies of their type.

Safety Achievement Award winners include, by category:

Local Distribution Utilities
Mega – Enbridge Gas Distribution (North York, Ontario)
Very Large – Dominion East Ohio Gas Co. (Cleveland, OH)
Large – Citizens Energy Group (Indianapolis, IN) and Comgas (Sao Paulo, Brazil)
Medium-Large – Dominion Hope (Clarksburg, WV)
Medium-Small – Equitable Gas Company (Pittsburgh, PA)
Small – Columbia Gas of Maryland (Cumberland, MD)
Combination Utilities: Large: PECO Energy (Philadelphia, PA); Medium: Central Hudson Gas & Electric (Poughkeepsie, NY); Montana-Dakota Utilities (Bismarck, ND).
Transmission Companies: Large: Tennessee Gas Pipeline (Houston, TX); Medium: – Eastern Shore Natural Gas (Dover, DE).
Vehicle Safety Achievement Award winners include, by category: Local Distribution Utilities: UGI Central Penn Gas (Reading, PA);
Combination Utilities: Consumers Energy (Jackson, MI). Transmission Utilities: CenterPoint Energy Pipelines (Houston, TX). Small Member Companies: Crossroads Pipeline (Bremen, IN); Northern Indiana Fuel & Light (Auburn, IN).

NGS Energy Plans Gas Storage Asset Acquisition

NGS Energy LP and El Paso Corp. have signed a Memorandum of Acquisition and Understanding with regard to El Paso’s Pinal County, AZ natural gas storage asset. Under the agreement, NGS Energy has an exclusive due diligence period and right to buy all acreage, wells, geological and technical data and rights currently held by El Paso. The project in the Picacho Basin would include a nine-mile header system that could connect to Transwestern Pipeline, El Paso Natural Gas Pipeline, as well as numerous new and proposed gas-fired plants.

ROSEN USA Completes Projects

ROSEN USA has completed the customization and implementation of ROSEN’s Asset Integrity Management Software (ROAIMS) for Equistar Chemicals, LP. This Houston based company operates 1,269 miles of pipelines locally, supplying various chemicals between refineries that are used in plastic applications.

The ROAIMS package was integrated with Equistar’s existing database to offer a collection of interoperable software tools. It provides a centralized database and a data management system that enables Equistar to make integrity management decisions based on all available data.

ROSEN’s International has completed an inline inspection project for NuStar Energy L.P., whose 8-inch LPG pipeline crosses under the Rio Grande river into Mexico. The work was done in collaboration between NuStar and ROSEN personnel in the U.S and Mexico.