Life Blood of the North East – Refined Product Pipelines

Hurricane Sandy, and the resulting gasoline shortage in the New York and New Jersey areas has put a spotlight on the refined products infrastructure in the North East. Though a lack of abundant local fuel production and a temporary shutdown of the Colonial pipeline certainly put a crimp on supplies, a lack of power to the local pipelines and fuel terminals had a much bigger effect on the end user. To this end, we thought we would take a look at the arteries of fuel supply in the North East.

Colonial Pipeline is the largest refined products pipeline in the United States. It has 5,500 miles of underground pipe, and has a capacity of greater than 2.3 million barrels per day. Colonial originates in Houston, TX with final delivery in Linden, NJ. The pipeline’s average tariff from Houston to New Jersey is $1.89/barrel, and the average delivery time from Houston to New Jersey is 18 days.

• Colonial is owned by a consortium of companies:
  • Koch Industries (28%)
  • KKR/Keats Pipeline Investors (23%)
  • Caisse de depot (17%)
  • Royal Dutch Shell/Shell Pipeline Company (16%)
  • Industry Fund Management (16%)
• Colonial Pipeline’s field operations are divided into three districts:
  • The Gulf Coast District includes Texas, Louisiana and Mississippi, and is primarily responsible for the originating deliveries on Colonial. Other than a few refineries in the Northeast, Colonial draws the products it delivers from refineries along the U.S. Gulf Coast.
  • The Southeast District includes Alabama, Tennessee, Georgia, South Carolina and North Carolina. The company’s second largest tank farm is in suburban Atlanta. Pipelines serving Tennessee and southern Georgia originate from Colonial’s Atlanta tank farm. Colonial’s two mainlines, which begin in Houston, TX, terminate at the company’s largest tank farm is near Greensboro, NC. Deliveries to the Northeast originate from this tank farm in North Carolina.
  • The Northeast District includes Virginia, Maryland Delaware, Pennsylvania and New Jersey. In Linden, NJ, Colonial operates the Intra-Harbor Transfer System. This system provides customers with the ability to transfer products amongst themselves, and also offers access barge transportation for exporting product.
• Colonial connects directly to many major airports, including Atlanta, Nashville, Charlotte, Greensboro, Raleigh-Durham, Dulles and Baltimore-Washington. It also serves metropolitan New York airports via connections with Buckeye Pipeline.

Buckeye (“BPL”) With a history tracing its roots back to 1886, when the Buckeye Pipe Line Company was incorporated as a subsidiary of the Standard Oil Company, BPL has over 6,000 miles of pipeline. Additionally, BPL owns ~100 liquid petroleum products terminals with an aggregate storage capacity of ~64 million barrels. BPL also operates/maintains ~2,800 miles of pipeline for major oil and chemical companies.

In the North East, specifically in Pennsylvania, New York, and New Jersey, Buckeye’s operating subsidiary Buckeye Pipe Line Company, L.P. (“Buckeye Pipe Line”) serves major population centers in Pennsylvania, New York and New Jersey through ~925 miles of pipeline. Buckeye’s pipeline system transports more than 1.4 million bpd of refined products.

• In Pennsylvania, New Jersey, and New York, refined petroleum products are received at Linden, NJ from 17 major source points, including two refineries, six connecting pipelines, and nine storage and terminalling facilities. Products are then transported through two lines from Linden to Macungie, PA. From Macungie, the pipeline continues west to Pittsburgh, PA and north through eastern Pennsylvania into New York. Products received at Linden are also transported to Newark Airport, to JFK Airport, to LaGuardia Airport and to refined petroleum products terminals at Long Island City, NJ and Inwood, NY.
• BPL also has a pipeline system which extends from Paulsboro, NJ to Malvern, PA. From Malvern, a pipeline segment delivers refined petroleum products to locations in upstate New York, while another segment delivers products to central Pennsylvania. Two shorter pipeline segments connect the Paulsboro refinery to the Colonial pipeline system and the Philadelphia International Airport.
• The Laurel pipeline system transports refined petroleum products through a 350-mile pipeline extending westward from four refineries and a connection to the Colonial pipeline system in the Philadelphia area to Pittsburgh, PA. Along the way to Pittsburgh, the Laurel pipeline passes through Reading, Harrisburg, Altoona/Johnstown, and Greensburg, PA.

Sunoco Logistics (“SXL”) owns and operates ~2,500 miles of refined products pipelines in selected areas of the United States. The company’s refined products pipelines transport nearly 600,000 bpd of refined products from refineries in the northeast, Midwest, and southwest United States to markets in New York, New Jersey, Pennsylvania, Ohio, Michigan, Texas, and Canada. The refined products transported in these pipelines include multiple grades of gasoline, middle distillates (such as heating oil, diesel and jet fuel) and LPGs (such as propane and butane).In addition to its wholly owned refined products pipelines, SXL also owns a two-thirds undivided interest in the Harbor pipeline and joint venture interests in four refined products pipelines in selected areas of the United States.
SXL’s refined products terminal facilities in the north east consist of:

•  25 active refined product terminals with an aggregate storage capacity of 5.7 million barrels, which provide storage, terminalling, blending and other ancillary services primarily to SXL’s refined products pipelines
• A 2 million barrel refined product terminal that previously served Sunoco’s Marcus Hook refinery near Philadelphia, PA
• One inland and two marine crude oil terminals with a combined capacity of 3 million barrels, and related pipelines, which served Sunoco’s Philadelphia refinery
• The Eagle Point terminal, a 5 million barrel refined product and crude oil terminal and dock facility

Plantation Pipe Line Company (PPL) Though it doesn’t directly service the North East, PPL is one of the largest refined petroleum products pipelines in the United States. It delivers approximately 600,000 barrels per day of gasoline, jet fuel, diesel and biodiesel through its 3,100-mile pipeline network. PPL originates in Louisiana and ends in the Washington, D.C. area. Along the way PPL serves various metropolitan areas including Birmingham, AL; Atlanta, GA; Charlotte, NC; and the Washington D.C. area. PPL is owned and operated by Kinder Morgan.

Getting Oil Out of the Bakken…

As the Bakken’s oil production growth continues to exceed expectations, oil production is now expected to eventually double or even triple to 1.2 – 2.0 million Bpd. The Bakken’s rapid growth is, however, being constrained by an inability to cheaply and efficiently move the oil out of the region. To this end, we thought we’d take a look at some of the infrastructure alternatives, and see if there might be an intriguing opportunities. Generally, lighter crude oils such as those produced by the Bakken have the greatest demand in the east in  PADDs I and II. This is because many of the PADD I and Ohio refineries have less ability to process heavier oils, as measured by their lower Nelson Complexity Ratings. Generally, heavier oils will go south to the PADD III refineries on the USGC which have been upgraded to process heavier oils.

There are two main ways to transport oil out of the Bakken: (1) by train, and (2) by pipeline.

Currently, because the Dakotas were never a historically prolific oil producing region, oil pipeline capacity out of the Bakken is limited to Enbridge’s (“ENB”) 200,000 Bpd pipeline, and many shippers have had to resort to shipping their oil to the USGC, or even the USEC, by rail. However, there are at least three pipeline systems under construction, and by 2015, pipeline capacity is expected to carry nearly all of the oil production from the Bakken.

Rail vs Pipeline Costs

One might ask why rail, as the incumbent carrier, wouldn’t be able to keep its current share of oil transportation customers. The answer is cost. Transporting oil by rail is dramatically more expensive than transporting oil by pipeline. Though much more expensive than a pipeline on a per barrel basis, rail has one big advantage. Many rail systems are already in place and need a minimal amount of capital upgrades to begin transporting oil. That said, as the $10 differential between the rail cost to St. James and the pipeline cost to the USGC shows, once up and running, pipelines are a much cheaper, more efficient, and more reliable way of transporting oil. However, pipelines are expensive to build, and take a fair amount of time to get permitted and into service.

The $14/Barrel differential in rail pricing to USEC vs to pipeline pricing to Petoka, IL creates opportunity to bring oil into Ohio and to the USEC. Petoka is about the farthest east that one can transport Bakken oil by pipeline. As was mentioned above, the the lack of heavy oil processing capability makes the Ohio and the PADD I/east coast refinery markets an appealing 1.5 million Bpd opportunity for Bakken oil. This said, once up and producing in the next three to seven years, the oil production from the Utica could satisfy 300k of this demand. Nevertheless, a 1.2 million Bpd market should be more than sufficient to support the construction of a pipeline to the east coast from the Midwest.

Bakken to the Midwest

To get oil to the USEC and to Ohio, transiting through Cushing, OK seems unnecessary, adding additional distance and cost to the trip. That said, skipping Cushing will eliminate OneOK (“OKE”) and TransCanada’s (“TRP”) Keystone XL pipelines as potential carriers out of the Bakken. Skipping OKE and Keystone XL will leave ENB as the main pipeline alternative out of the Bakken.

If one takes either OKE’s or Keystone XL’s pipeline from the Bakken to Cushing, to get east, one will need to use ENB’s Ozark Pipeline to Wood River, IL or BP’s pipeline to get to Whiting, IL. Using either of these two alternatives does not seem like a cost effective alternative to using one of ENB’s pipelines the whole way from the Bakken. ENB’s mainline can get crude from the Bakken to Toledo, OH, or to either Chicago or Patoka, IL.

The High Prairie Pipeline, a yet to be built pipeline out of the Bakken is currently fighting with ENB to interconnect with ENB’s mainline at Clearbrook, MN. Another option for High Praire to move its crude south and/or east might be to interconnect with the Koch (Minnesota/Koch) pipeline system. Koch’s Minnesota Pipeline begins at Clearbrook, MN, and then interconnects with the Koch Pipeline in St. Paul, MN. The Koch Pipeline terminates at Wood River, IL. Because there are a lot of historical relationships between High Prairie’s management team and Koch, many members of High Prairie’s management team used to work at Koch, we feel like this could be a easier and better alternative than interconnecting with ENB.

Possible East Coast Pipeline Partners:

As oil production in the Utica ramps up, it is likely that local refiners in Ohio (Marathon, Husky, BP/Husky, and PBF) will absorb most of the 300k Bpd of light oil produced by this formation.This however, does not mean that there isn’t a need for pipeline infrastructure to get oil from Ohio to the PADD I refineries, most of which seem to be clustered in and around the  Philadelphia area. This pipeline need will play to companies who already service some or all of these refineries for either crude delivery or refined product take away capacity and to those companies who can aggregate disparate pipeline networks and rights of way. We see some possible players as being the following:

• Marathon Petroleum (“MPC”)
  • Has rights of way, and crude and refined products pipeline connections to terminals and refineries in Ohio.
  • Marathon Pipeline connects Petoka, IL to Marathon’s refineries in Ohio.
  • Does not have pipeline connectivity east of Ohio.
• Sunoco (“SUN/SXL”)
  • Has rights of way and pipeline connections from many of the Philadelphia area refineries to markets in Pennsylvania, Ohio, and Michigan.
  • Also controls the Inland Pipeline, a refined products pipeline which connects three refineries to eastern Ohio and western Pennsylvania markets.
  • Could be possible to use rights of way and underutilized/unused pipe to get crude from either Toledo or one of Inland’s Ohio refineries to Philadelphia.
• Buckeye (“BPL”)
  • Has rights of way and refined products connections to terminals and refineries in Pennsylvania, Ohio, New York, and New Jersey.
• Enterprise Products (“EPD”)
  

• EPD owns the interstate ATEX pipeline.
• Though it crosses Indiana, Ohio, and Pennsylvania, ATEX is primarily a NGL pipeline and does appear to connect to refineries.

Conclusion

ENB seems poised to be the dominant transporter of crude, not only from Canada, but also out of the Bakken. However, a good counter balance would seem to be a combination of the MPC pipeline network and either the SUN/SXL or BPL pipeline network. This combination would create a pipeline network which serves a thirsty but under-served region with 1.5+ million Bpd of light oil demand.

PDVSA Refinery Fire, A Catalyst for Non-Core Divestitures?

Last month’s tragic explosion at PDVSA’s massive (940,000 Bpd) Amuay refinery in Venezuela could serve as a catalyst for PDVSA to divest itself of some non-strategic assets. This fire will not only exert near term financial pressure on PDVSA as it is forced to purchase of refined product to satisfy local demand, but also medium term pressure as it tries to balance the need to spend capital to maintain current output, while also supporting Venezuela’s massive social programs.

US Pipelines Non-Core?

With most US interstate pipelines being common carrier, where the pipeline must offer its services to the general public under tariffed rates, PDVSA’s two US refineries only gain a minimal strategic advantage by owning non-controlling interests in crude oil and refined products pipelines. Though they are able to financially benefit from a pipeline’s profitability, lowering the effective rate they pay to use the pipelines, ownership of a non-controlling interest often offers a minority owner little influence on day-to-day operations. Minority owners may only have a blocking right on major decisions such as a change in a pipeline’s usage or direction.

To that end, should PDVSA divest itself of its minority interests in four US pipelines, it is likely that PDVSA’s two major US refineries will be able to receive the same level of service while freeing up capital.

PDVS’s US Pipelines

Inland Pipeline (refined products) – PDVSA owns a 16.2% interest in the Inland Pipeline. Sunoco Logistics (“SXL”), with a 83.8% ownership, owns a controlling interest in Inland, and SXL is also the operator of the Inland Pipeline. Inland is the owner of 350 miles of active refined products pipelines in Ohio. The pipeline connects three refineries in Ohio to terminals and major markets in Ohio. Based on the last sale of an interest in Inland in May 2011, the pipeline was valued at $118 million.

West Shore Pipeline (refined products) – PDVSA owns an 18.4% interest in the West Shore Pipeline. With a 34.6% ownership, Buckeye (“BPL”) is the operator of the West Shore Pipeline. The other owners of West Shore include ExxonMobile (“XOM”; 11% ownership), Shell (“RDS.A”; 18.9%), and Sunoco Logistics (17.1%). West Shore owns and operates approximately 650 miles of common carrier refined products pipelines that originate in Chicago, Illinois and which service delivery points from Chicago to Wisconsin. Based on the last sale of an interest in West Shore in July 2010, the pipeline was valued at $125 million.

West Texas Gulf (crude oil) – PDVSA owns 11.4% of the West Texas Gulf Pipeline. The other owners of West Texas Gulf are Sunoco Logistics (60.3%) and Chevron (“CVX”; 28.3%). West Texas Gulf owns and operates approximately 600 miles of common carrier crude oil pipelines which originates from the West Texas oil fields at Colorado City and the Sunoco Logistics’ Nederland terminal, and extends to Longview, Texas where deliveries are made to several pipelines, including Mid-Valley. Based on the last sale of an interest in West Texas Gulf in August 2010, the pipeline was valued at $352 million.

Wolverine Pipeline (refined products) – PDVSA owns 9.5% of the Wolverine Pipeline. The other owners of the Wolverine pipeline are ExxonMobile (36.2%), Marathon (“MPC”, 5.6%), Shell (17.2%), and Sunoco Logistics (31.5%). Wolverine operates 700+ miles of active refined product pipeline in three states, connecting Chicago refineries to terminals in Michigan and Northwest Indiana and moving product west to east. Wolverine transports over 300,000 BPD of refined products.

It is important to note, many pipeline partnership agreements give existing owners a Right of First Refusal or a Last Look on the sale of an interest in a pipeline. Though it may be possible to structure a sale to circumvent the ROFRs or LLs, these structures often limit the universe of potential buyers of a minority in a pipeline to a pipeline’s existing owners. Because the universe of potential buyers may be limited, the sale of a minority interest in a pipeline may generate a less than desired amount of upside for the seller.

Note: Most of PDVSA’s assets in the US are held through its Citgo subsidiary.

Who Has Infrastructure in the Utica and Marcellus?

With an estimated 5.5 billion barrels of potential oil reserves, the Utica could come close to rivaling the Bakken and Eagle Ford formations in terms of potential oil production. If it does, the Utica’s light shale oil could become a potential windfall for PADD I and Canadian refineries who are not engineered to process the cheaper but heavier grades of crude which are produced in Canada, Mexico, Venezuela or Saudi Arabia, and which are dependent on more expensive seaborne imports of light crude from West and North Africa, and from the North Sea.

With nearly 1.2 million Bpd of demand which is currently being fulfilled entirely by seaborne imports of light sweet crude because of a lack of physical infrastructure to move crude from the US Gulf Coast and Mid-Continent regions to the East Coast, it would seem PADD I refiners could be one of the readiest (and easiest) customers for oil produced in the Utica. Though slightly farther away, Canada’s Eastern refineries, with their 1.2 million Bpd of demand, also lack the infrastructure necessary to access crude from Alberta and the Mid Continent, and as a result, are forced to import crude. Given the opportunity, these refiners, and their 1.2 million bpd of demand, could also be ready consumers of oil from the Utica. Finally, some eastern PADD II refiners could also be ready customers for Utica oil, but many of the major PADD II refiners are retooling to be able to use the cheaper and ever increasing volumes of heavier crudes which are being produced in Canada. This retooling could increase PADD II heavy crude demand by 470,000 bpd, while freeing up 430,000 bpd of light crude, to the benefit of PADD I and Eastern Canadian Refiners.

Though the Utica Shale lies under most of New York, Pennsylvania, Ohio, and West Virginia and extends under adjacent parts of Ontario and Quebec in Canada and Kentucky, Maryland, Tennessee, and Virginia in the United States, the Utica’s oil window is expected to largely lie under eastern Ohio. Exploration and development of the Utica has just started, but early results in Harrison and Carroll County, Ohio have been encouraging,  and as a result, it might be time to begin to think about how to get the oil from the wells to a refinery. To that end, we thought we would explore the north-eastern assets of some of the larger petro-logistics companies.

Though Ohio was once a prolific oil producer, spawning the construction of the the eighth largest refining capacity in the US, Ohio’s oil and gas production is not what it once was. While its refining infrastructure has endured, its petro-logistics infrastructure could use some revitallization.

There are generally three main ways to move crude oil and refined products. Though pipelines have recently had some spill issues, they are generally much safer and more efficient than trains, trucks and barges when transporting fuel long distances. That said, before a critical mass of oil wells are developed, trucks are often the best way to aggregate production from dispersed wells, and trains are often the easiest way to ship production before more permanent infrastructure can be built. The following are some of the companies which have existing crude oil and refined products infrastructure in the Utica. These assets, together with their associated rights of way, could serve as a solid foundation upon which to rebuild the infrastructure needed to bring crude east from Ohio to PADD I refiners:

• Buckeye Partners (“BPL”) – With a history tracing its roots back to 1886, when The Buckeye Pipe Line Company was incorporated as a subsidiary of the Standard Oil Company, BPL has over 6,000 miles of pipeline. Additionally, BPL owns ~100 liquid petroleum products terminals with an aggregate storage capacity of ~64 million barrels, and operates/maintains ~2,800 miles of pipeline for major oil and chemical companies.
  • Pennsylvania/New Jersey/New York Pipelines – BPL serves refined petroleum product demand in major population centers in Pennsylvania, New York and New Jersey through ~925 miles of pipeline. Refined petroleum products are received at Linden, NJ from 17 major source points, including two refineries, six connecting pipelines, and nine storage and terminalling facilities. Products are then transported through two lines from Linden to Macungie, PA. From Macungie, the pipeline continues west to Pittsburgh, PA and north through eastern Pennsylvania into New York. Products received at Linden are also transported to Newark Airport, to JFK Airport, to LaGuardia Airport and to refined petroleum products terminals at Long Island City, NJ and Inwood, NY.
    • BPL also has a pipeline system which extends from Paulsboro, NJ to Malvern, PA. From Malvern, a pipeline segment delivers refined petroleum products to locations in upstate New York, while another segment delivers products to central Pennsylvania. Two shorter pipeline segments connect the Paulsboro refinery to the Colonial pipeline system and the Philadelphia International Airport.
    • The Laurel pipeline system transports refined petroleum products through a 350-mile pipeline extending westward from four refineries and a connection to the Colonial pipeline system in the Philadelphia area to Pittsburgh.
  • Ohio/Indiana/IllinoisMichigan/Missouri Pipelines – BPL transports refined petroleum products in northern Illinois, central Indiana, eastern Michigan, western and northern Ohio, and western Pennsylvania through ~2,100 miles of pipeline. A number of receiving lines and delivery lines connect to a central corridor which runs from Lima, OH through Toledo, OH to Detroit, MI. Refined petroleum products are received at a refinery and other pipeline connection points near Toledo, Lima, Detroit, and East Chicago, IN. Major market areas served include Peoria, IL; Huntington/Fort Wayne, Indianapolis and South Bend, IN; Bay City, Detroit and Flint, MI; Cleveland, Columbus, Lima and Toledo, OH; and Pittsburgh.
  • Midwest Pipelines – In the midwest, BPL also owns eight refined petroleum products pipelines whose aggregate mileage total ~1,250 miles. Refined petroleum products are received from the Wood River, IL refinery and are transported to Chicago, to BPL terminals in St. Louis, MO, to the Lambert-St. Louis Airport, to receiving points across Illinois and Indiana, and to BPL’s pipeline in Lima. Petroleum products are also transported from East St. Louis, IL to East Chicago with delivery points in Illinois and Indiana, and from East Chicago to Kankakee, IL.

• Crosstex Energy, LLC (“XTEX”) – Though substantially smaller than some of its brethren, XTEX has begun to establish a presence in the Utica through its acquisition of Clearfield Energy. Through this acquisition, XTEX now has assets which handle ~300,000 barrels per month of crude and condensate in Ohio, Kentucky and West Virginia. These assets include:
  • A 4,500-barrel-per-hour crude oil barge-loading terminal on the Ohio River
  • A 28,000 bpd crude oil rail-loading terminal on the Ohio Central Railroad network. XTEX expects to expand this facility to a 56,000 bpd  facility by year-end 2012.
  • 200 miles of crude oil pipelines in Ohio and West Virginia
  • More than 500,000 barrels of above ground storage
  • Six brine water disposal wells, with two additional wells under development
  • An extensive truck fleet with a handling capacity of 35,000 bpd
  • XTEX also acquired more than 2,500 miles of unused right of way for future expansions.

Though they do not have nearly the economies of scale which come with more permanent infrastructure such as a pipeline or even rail, trucks and barges are often the easiest way to aggregate initial oil production until more permanent infrastructure can be constructed.

• Marathon Petroleum (“MPC”) – With its beginning as The Ohio Oil Company, before being absorbed into the Standard oil Trust, MPC, through Marathon Pipe Line LLC (MPL), manages one of the largest petroleum pipeline networks in Ohio. In aggregate, MPL owns, leases, or has ownership interests in ~8,300 miles of pipeline spread across 52 systems in 12 states. Below is a partial list of MPC’s pipeline interests:

Pipelines which are owned and operated by refiners and/or E&P companies are often underutilized and are not operated to their peak commercial potential. As a result, they can often benefit from being owned and managed by more focused third party.

• Sunoco Logistics (“SXL”) – Sunoco got its start in 1886 as one of Standard Oil’s first substantial competitors. In the northeast, SXL has the following assets:
  • Included in SXL’s Crude Oil Pipeline System is a 91% interest in the Mid Valley Pipeline Company, a crude oil pipeline which consists of a ~1,000 mile pipeline originating in Longview, TX, passing through Louisiana, Arkansas, Mississippi, Tennessee, Kentucky and Ohio, before terminating in Samaria, MI. This pipeline provides crude oil to a number of refineries, primarily in the midwestern United States.
    • In addition, SXL owns a ~100 miles of crude oil pipeline that runs from Marysville, MI to Toledo, OH, and a truck injection point for local production at Marysville.
  • The SXL Refined Products Pipeline System consists of ~2,500 miles of refined products pipelines which transport refined products from refineries in the northeast, midwest and southwest United States to markets in New York, New Jersey, Pennsylvania, Ohio, Michigan, Texas and Canada. The refined products transported in these pipelines include multiple grades of gasoline, middle distillates (such as heating oil, diesel and jet fuel) and LPGs (such as propane and butane).
    • Included in SXL’s Refined Products Pipeline system is an 84% interest in Inland Corporation, a pipeline system SXL operates that connects three refineries in Ohio to terminals to major markets in Ohio. SXL  also operates, and owns a 2/3s interest in the Harbor Pipeline, which transports products from the Philadelphia area to the Linden/Newark, New Jersey area.

• Williams Partners (“WPZ”) – Though its infrastructure is mostly natural gas and NGL oriented, WPZ has been building up its presence in the Marcellus and Utica through step out acquisitions around its Transco interstate natural gas pipeline. Since 2010, WMB has made the following acquisitions to form a foundation for its Marcellus and Utica business:
  • Cabot Midstream Assets – In December 2010, WPZ spent $150 million to purchase Cabot Oil & Gas’s midstream assets in Susquhana, PA. These assets included 75 miles of gathering systems and a 25 year dedicated gathering agreement covering 138,000 net acres.
  • Laser Gathering System – In December 2011, WPZ spent $750 million to purchase the Laser North East Gathering system. These assets included 33 miles of 16 inch gathering systems in north eastern Pennsylvania, and 10 miles of gathering pipeline southern New York. This acquisition was supported by existing long-term gathering agreements with acreage dedications and volume commitments.  As gas production in the Marcellus increases, the Laser system is expected to 1.3 bcfd of natural gas.
  • Caiman Eastern – In April 2012, WPZ spent $2.4 billion to acquire Caiman Eastern Midstream, LLC. This acquisition establishes WMB’s Ohio Valley Midstream business and provides WPZ with a significant footprint with strong growth potential in the natural gas liquids-rich portion of the Marcellus Shale in northern West Virginia, eastern Ohio, and south-western Pennsylvania. This business is anchored by long-term contracts, including gathering dedications totaling 236,000 acres from 10 producers. Additionally, there are processing commitments in place for 100 mcfd of gas and work is under way to expand the existing physical assets, which include a gathering system and a processing facility. Finally, construction is underway on NGL fractionation and additional processing facilities, and the company is also considering the construction of natural gas liquid (NGL) pipelines.
  • Caiman II Investment – Caiman II’s area of focus will be the natural gas liquid- and oil-rich areas of the Utica Shale in Ohio and northwest Pennsylvania. Together with EnCap Flatrock Midstream of San Antonio, Highstar Capital of New York, and Caiman management WPZ anticipates that Cainman II will invest ~$800 million to develop natural gas, natural gas liquid and crude oil gathering and processing infrastructure. WPZ’s anticipated share of the $800 million in potential development is could total up to $380 million over the next several years.