Constitution Field to Provide Oil for Cameron Hwy Pipeline

Cameron Highway Oil Pipeline Company, a venture jointly owned by GulfTerra Energy Partners, L.P. and Valero Energy Corporation, has executed an agreement with Kerr-McGee, for the dedication and movement of crude oil production from the Constitution and Ticonderoga fields, along with other future potential production from several undeveloped blocks in the south Green Canyon area of the deepwater trend of the Gulf of Mexico.

Under the terms of the agreement, production from Kerr-McGee's interest in Constitution, Ticonderoga and surrounding undeveloped blocks is dedicated to the Cameron Highway Oil Pipeline System for the life of the reserves. GulfTerra will install, own and operate a new 70-mile, 16-inch oil gathering pipeline with a minimum capacity of 80,000 barrels per day that will connect the field with the Cameron Highway Oil Pipeline at the Ship Shoal 332B platform. First production from the Constitution platform is expected in mid- 2006.

The Cameron Highway Oil Pipeline System, expected to be completed in the fourth quarter of this year, will be a 390-mile crude oil pipeline system with a capacity of approximately 500,000 barrels of oil per day. The 30-inch diameter pipeline segment of the system begins at Cameron Highway's new Ship Shoal 332B platform located 75 miles south of the Louisiana coastline in the Gulf of Mexico and runs west 113 miles along the Outer Continental Shelf to GulfTerra's Garden Banks 72 hub platform. From Garden Banks 72, the pipeline goes northwest to the new High Island A-5 platform, from which two 24-inch pipeline segments will deliver oil to multiple delivery points in Texas City and Port Arthur, Texas.

The Cameron Highway Oil Pipeline System was designed to gather crude oil production from the prolific Green Canyon and Garden Banks areas of the central Gulf of Mexico and deliver it to Texas crude oil markets. The project was announced in February 2002 after production from the Holstein, Mad Dog and Atlantis deepwater trend discoveries was dedicated to the Cameron Highway Oil Pipeline System. Construction has been ongoing since mid-2003 and is nearly complete, with only the High Island A-5 deck installation, platform connections and system testing and linefill procedures remaining.

"The dedication of Kerr-McGee's reserves from Constitution, Ticonderoga and the surrounding area demonstrates that Cameron Highway is an attractive option for deepwater trend producers seeking a market outlet for their production in the Texas Gulf Coast markets," said Robert G. Phillips, chairman and chief executive officer of GulfTerra Energy Partners. "With seven delivery points in the Texas City and Port Arthur areas, the Cameron Highway Oil Pipeline System offers producers the most direct route to refining and transportation facilities in Texas."

Bill Greehey, Valero's chairman and chief executive officer, said, "It's exciting that Cameron Highway has already secured another major shipper of crude oil before the pipeline has even come on line. Cameron Highway gives producers easy access to Texas refineries and enables these refiners to secure a stable source of high-quality domestic crude oil at a savings, compared to foreign-sourced alternatives. Not only does Valero benefit because the pipeline can supply several of our refineries, but we also benefit because the partnership is expected to generate a steady flow of income."

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