BHP To Invest in GOM Pipeline System

BHP Billiton said it would take equity ownership in two limited liability companies that will transport hydrocarbons from the Group's recently sanctioned Mad Dog oil and gas development and its Atlantis discovery, both in the ultra-deepwater Gulf of Mexico.

The pipelines are part of a new system being built in the southern Green Canyon area that will also transport hydrocarbons from the BP-operated Holstein development, and potentially other fields in the area.

BHP Billiton will acquire a 25 percent interest in the new Caesar oil pipeline (28-inch diameter) and a 22 percent interest in the Cleopatra gas pipeline (20-inch diameter). Capital costs for the development are expected to be about US$100 million (BHP Billiton share). The Caesar pipeline will have a design capacity of at least 450,000 barrels of oil per day (bopd), and Cleopatra will have a capacity of 500 million standard cubic feet of gas per day (mmscfd).

The pipelines will be about 120 miles long, including laterals, and are the first of their size to be laid in water depths greater than 5,000 feet in the Gulf of Mexico. Both will be installed on a parallel timeframe with the Mad Dog and Holstein field developments and commissioning is expected in 2004.

President and CEO BHP Billiton Petroleum Philip Aiken said: "This investment provides BHP Billiton with equity participation in a strategically and commercially important infrastructure project that will serve the southern Green Canyon area where significant discoveries have been made by BHP Billiton, BP, Shell and Unocal, as well as other third parties."

The equity ownership enables BHP Billiton to secure transportation arrangements for Mad Dog, Atlantis and future proximal discoveries. In addition, the arrangements provide BHP Billiton with the opportunity to capture additional value from the transportation of third-party volumes resulting from industry exploration and development activity in the area.

As part of the agreement BHP Billiton will utilize the infrastructure to transport its 23.9 percent equity share of the hydrocarbons from the Mad Dog development (gross reserves 200-450 million barrels of oil equivalent, mmboe) and its 44 percent equity share of the hydrocarbons from the Atlantis discovery (gross reserves 400-800 mmboe), which is scheduled for approval later this year.

These quantities, together with the BP-operated Holstein field, constitute the underpinning volumes for the development.

The system will link to Ship Shoal Block 332, which connects to the existing Manta Ray gas gathering system and the Cameron Highway oil pipeline system - a new offshore pipeline recently announced by El Paso Energy Partners. From there, oil and gas will be transported to markets in Texas and Louisiana.

The participants in the Caesar and Cleopatra pipeline system are BHP Billiton, BP (operator), Shell, Equilon Pipeline Company and Unocal. BP will be the construction manager and operator of these systems through its wholly-owned subsidiary Mardi Gras Transportation System Inc.