"The Devils Tower project is another major step in helping Williams continue to build its shareholder value," said Steven J. Malcolm, executive vice president of Williams and CEO of Williams' energy services unit. "The project significantly expands our productive capacity through new assets. It also optimizes the use of our existing assets and extends our geographic footprint in a very prolific area in the Gulf of Mexico."
In a first of its kind agreement in the Gulf of Mexico signed on Aug. 29, Williams will provide the infrastructure for the Devils Tower field co-owned by Dominion Exploration & Production, Inc. and Pioneer Natural Resources Company. In exchange for the use of the facilities required to produce the Devils Tower field, Dominion E&P and Pioneer will make fixed monthly payments. Williams will own the floating production facility and export pipelines. Williams has contracted with Dominion E&P to operate the floating production facilities. Devils Tower is an oil discovery with associated gas. Under the agreement, Williams energy marketing and trading group will directly purchase the associated gas produced by Dominion E&P and Pioneer through the facility. Dominion will market its oil production from the Devils Tower discovery.
Williams plans to build two export pipelines from the floating production facility as part of the project. The Mountaineer oil pipeline is comprised of approximately 6 miles of 14-inch and 70 miles of 18-inch deepwater pipeline and 50 miles of 20-inch shallow-water pipeline. The Mountaineer pipeline will transport crude oil from the deepwater platform to an onshore oil terminal. The Canyon Chief gas pipeline consists of approximately 6 miles of 14-inch and 90 miles of 18-inch deepwater pipeline. The Canyon Chief pipeline will carry raw gas to the Mobile Bay lateral owned by Transco, a unit of Williams.
The Transco lateral will move the product to Williams' Mobile Bay gas processing plant. The natural gas liquids will then be shipped to Williams' Baton Rouge fractionator and other downstream markets on the Tri-States and Wilprise pipelines, which are operated and partly owned by Williams. The natural gas will be available for delivery to Southeast markets through area pipelines, including the Transco pipeline system and the under construction Gulf Stream Natural Gas System, a joint interstate pipeline development of Williams and Duke Energy.
"Devils Tower will allow Williams to better manage and more fully utilize all of its value chain assets and businesses associated with this project," Malcolm said. "This project is a total Williams solution that involves marketing and trading, our midstream facilities and our gas pipeline systems. Devils Tower will also help Williams achieve its deepwater goal of investing in assets capable of serving multiple fields, like our previously announced East Breaks project."
By using the floating production facility and export pipelines as a hub, Williams plans to market transportation and production services to producers developing other fields in the Mississippi Canyon. Producers will be able to tieback to the Devils Tower facilities to ship their oil and gas to shore without the expense of building their own production and pipeline systems.
The facilities are scheduled to be in operation by mid-2003. The floating production facility will be able to handle up to 60,000 barrels of oil per day. The Mountaineer pipeline will have a capacity of 150,000 barrels of oil per day. The Canyon Chief pipeline will have a capacity of 350 million cubic feet of gas per day.
Devils Tower is Williams' first floating production facility. It will be built at the Devils Tower field located about 140 miles southeast of New Orleans at Mississippi Canyon Block 773 in 5,610 feet of water. This floating production facility will be the world's deepest dry tree platform. Dominion had previously contracted with SparTEC, a subsidiary of J. Ray McDermott, to engineer, procure and construct the Devils Tower truss spar floating production facility. As part of the Aug. 29 agreement, Williams assumed responsibility for payment due under the SparTEC contract.
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