GulfTerra & Valero Finalize Agreements for Cameron Highway

GulfTerra Energy Partners, L.P., formerly El Paso Energy Partners, L.P., and Valero Energy Corporation have completed agreements to form a 50/50 joint venture in the $458-million Cameron Highway Oil Pipeline System project. A $325-million non-recourse financing for the project was also completed.

Cameron Highway, which was announced in February 2002, will be a 390-mile pipeline that will have capacity to deliver up to 500,000 barrels of oil per day from the southern Green Canyon and western Gulf of Mexico areas to the major refining areas of Port Arthur and Texas City, Texas. When completed, the pipeline will be one of the largest crude oil delivery systems in the Gulf of Mexico, sized to handle oil movement for the major Deepwater Trend discoveries, Holstein, Mad Dog, and Atlantis, its initial anchor fields, as well as other Deepwater oil discoveries. GulfTerra will build and operate the pipeline, which is scheduled for completion during the third quarter of 2004. Valero will pay GulfTerra approximately $51 million, representing 50 percent of the capital investment expended to date for the pipeline project. In addition, Valero will pay a total of $35 million in participation fees to GulfTerra for developing the project, $19 million of which was paid at closing, $5 million to be paid once the system is completed and the remaining $11 million by the end of 2006.

"We look forward to working with Valero as our partner in Cameron Highway," said Robert G. Phillips, Chairman and Chief Executive Officer of GulfTerra Energy Partners. "The combination of Valero's refining expertise and GulfTerra's capabilities as a developer of Gulf of Mexico infrastructure will benefit Cameron Highway producers with enhanced services and improved access to the Texas oil markets."

"Valero is excited to participate in the Cameron Highway project because it's a very strategic investment for the company," said Bill Greehey, Valero's Chairman of the Board and Chief Executive Officer. "This project is a great opportunity for Valero to secure a stable source of high-quality crude oils at a savings as compared to foreign-sourced alternatives, while enhancing our feedstock flexibility. In addition, our equity participation in this project is expected to yield a steady flow of income to the company."