Marathon To Develop UK Pipeline

Marathon Oil Company announced plans to lead an initiative for a new North Sea natural gas pipeline designed to provide additional gas for the UK market. UK-based natural gas retail marketer and producer Centrica plc has agreed to support the project as a potential purchaser of gas transported by the pipeline.

Marathon estimates the pipeline could begin operations in 2005, assuming timely regulatory approval by applicable UK, Norwegian and European regulatory officials, satisfactory supply commitments and financing arrangements, as well as final engineering design. The proposed pipeline represents a step forward in assuring adequate natural gas supply for the UK market over the next 20 years, during which demand for this clean, efficient energy source is expected to grow substantially.

Commenting on the project, Marathon Oil Company president and CEO Clarence P. Cazalot, Jr., said, "This pipeline project is another example of Marathon's strategy of developing innovative energy solutions and unique partnerships. In this case, we propose to facilitate the transportation of new and existing UK and Norwegian gas supplies to the growing market in the southern region of the UK while enhancing the value of existing North Sea infrastructure, including Marathon's Brae and Heimdal facilities. These facilities are uniquely suited to give the UK and Europe expanded access to the significant natural gas resources of the North Sea."

The proposed 675 kilometer dry natural gas pipeline would connect the Norwegian Heimdal area of the North Sea to Bacton, on the southeast coast of the UK. The pipeline would pass through the Marathon-operated UK Brae complex and pass adjacent to the UK Miller and Britannia complexes. These installations are among the largest gas processing/transportation facilities in the UK North Sea. The pipeline would terminate at or near the existing Bacton Terminal.

The Brae and Heimdal facilities have significant compression and processing capacity, and their close proximity to the Norwegian - UK border would help gather new gas supplies and act as a price reference point.

Speaking on behalf of Centrica plc, Jake Ulrich, Managing Director, Energy Management Group adds, "Centrica is pleased to see that Marathon is taking the lead on the proposed pipeline which can help in assuring that the necessary infrastructure will be in place to provide a reliable and cost effective natural gas delivery system to meet the growing demand for this premium energy source. Centrica looks forward to being an active part of these discussions."

Recognizing the improved security of supply that this development might bring, Callum McCarthy, chairman of the UK's Gas & Electricity Markets Authority (Ofgem), said, "We are pleased to see the market responding to the clear investment signals provided by the outcome of Transco's entry capacity auctions."

The pipeline would allow gas to be aggregated from numerous UK and Norwegian North Sea producers for transportation to Bacton at a projected rate of some 900 million cubic feet per day (mmcf/d). The gas could then be sold to commercial, industrial and residential customers in the UK's major demand region.

The development of additional cross border transportation infrastructure between Norway and the UK is high on the agenda of industry and government in both countries. The proposed new pipeline is viewed as one key element in future developments.

Marathon plans to conduct an open season on gas supplies for the pipeline project during which UK and Norwegian gas owners and operators will be invited to offer gas volumes and contract for capacity on the pipeline. In addition, Marathon has invited several parties to actively invest in this important project.