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New Gulf of Mexico fields bolster new and existing assets

Sep. 20, 2017 7:05 AM ET: EXTRACTS FROM THE ARTICLE: “Williams’ Long-Term Gulf Of Mexico Upside”

Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) is developing the Appomattox and the Vicksburg fields with the first stage of development expected to recover 650 million barrels of oil equivalent. That includes 596 million barrels of crude and 396 billion cubic feet of natural gas, with a planned peak production rate of 175,000 BOE/d. Two tie-back opportunities, the Gettysburg and Rydberg fields, could be developed through future development schemes.

Back in 2016, Shell and CNOOC (NYSE:CEO) (CNOOC owns Nexen) reached a deal with Williams to construct midstream infrastructure servicing the Appomattox development. Shell is constructing the 55-mile long Norphlet Pipeline that will route new gas streams to the existing offshore Transco platform in East Main Pass Block 261.

Williams Field Services – Gulf Coast Company LP (abbreviated WGC), will construct various facilities on that Transco platform to enable those upstream volumes to be metered and split into two streams. WGC is leasing space on the Transco platform from Williams Partners LP because it is more economical to do so than other options. From there, some of those volumes will travel along Transco’s existing 4B Lateral to the onshore Mobile Bay cryogenic processing plant in Mobile, Alabama, which has the ability to process 700 MMcf/d and extract 30,000 bpd of NGLs. The Mobile Bay plant is 100% owned by Williams Partners LP.

The other stream will travel along a 5.8-mile long pipeline which will be constructed and operated by WGC to the third-party owned Destin Pipeline, which will route gas to the onshore Pascagoula processing plant in Mississippi (also owned by a third-party). The reason why the gas stream is being split is that it will contain more liquids than those two offshore-to-onshore takeaway options can handle by themselves.

Complicated ownership

Now here is where the ownership picture gets a little confusing. Williams Partners LP owns all of the Transcontinental Gas Pipe Line Corporation (known as Transco), so the additional volumes will directly benefits its existing midstream assets.

However, (from FERC filing linked below) WGC “is principally owned by Williams Field Services Enterprises LLC, which in turn is an indirect wholly-owned subsidiary of The Williams Companies, Inc.”

This implies that the midstream infrastructure WGC is constructing won’t be owned by Williams Partners LP but by its parent Williams Companies Inc. Also worth noting is that WGC “has an option to purchase the Norphlet Pipeline from Shell.”

To read more about Williams Companies Inc and Williams Partners LP, check out the Atlantic Sunrise expansion of the midstream family’s Transco system by clicking here and Williams’ dominance in West America’s natural gas transportation space by clicking here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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