Growth Spurts
Energy Transfer’s footprint across Texas continues to expand, but the company wants to be among the leading natural gas companies in the nation. “We’ve been able to put together a pipeline system that touches every gas hub in Texas,” Howard says. “No matter where our customers are producing natural gas, we can get it to market for them.”

Energy Transfer says its focus on acquiring strategic assets allows it to reach a larger customer base. In 2002, the company acquired its first major pipeline assets from Kansas City, Mo.-based Aquila Inc. Among the acquired assets were more than 2,000 miles of gathering pipeline, processing and treating and a 50 percent ownership of the Oasis pipeline.

Shortly thereafter, Energy Transfer acquired the remaining 50 percent from the other owner, giving it 100 percent ownership. In the following years, the company acquired pipelines from TXU Fuels (TUFCO) in North and East Texas, Houston Pipeline along the Gulf Coast and the gathering assets of Devon Energy in Central Texas.

In 2004, ETP and TUFCO announced an expansion in their joint marketing agreement, growing to include the Fort Worth Basin region. Under this agreement, ETP committed to constructing a natural gas pipeline that connects TUFCO’s North Texas pipeline to its Old Ocean pipeline. “In connection with this project, [TUFCO] will provide shippers access to its available capacity in the Old Ocean system as a conduit for producers to deliver gas to the new pipeline,” ETP said.

“This agreement allows TUFCO to expand its market opportunities and increase its earning potential,” TUFCO VP of Origination and Business Development Peter Greenberg said. “With this action, we can grow the pipeline and services we offer other customers without major capital expenditures required by TUFCO.”

Energy Transfer anticipates the agreement will relieve pipeline capacity constraints throughout the region. “Enhanced and improved completion techniques and rapidly expanding growth in the Barnett Shale has made this region one of the most active drilling areas in the United States,” Senior Vice President of Commercial Development Mackie McCrea said in a statement. “Through this expansion of the partnership between Energy Transfer and TUFCO, producers in the Fort Worth Basin will be provided a firm outlet to premium markets within Texas.”

In 2006, the company entered the interstate pipeline business through the acquisition of Transwestern Pipeline and, in 2007, announced a 50/50 joint venture with Kinder Morgan to build the Midcontinent Express pipeline.

The 500-mile Midcontinent Express Pipeline (MEP) begins near Bennington, Okla., and will extend through to Perryville, La. In Butler, Ala., the pipeline will end at an interconnection with Transco, Energy Transfer notes.

According to Energy Transfer, MEP has a capacity of 1.4 billion cubic feet per day and, pending regulatory approval, it will be in service by February 2009. The $1.25 billion pipeline already has binding commitments from a number of shippers, including Chesapeake Energy Marketing Inc. for 500,000 dekatherms per day, Energy Transfer says.

The pipeline will interconnect with Kinder Morgan subsidiary Natural Gas Pipeline Co. of America, and the company says it expects it to provide “a seamless transportation path from various locations in Oklahoma into and through MEP.”

Today, Kinder Morgan operates as one of the largest publicly traded pipeline limited partnerships in the nation, owning or operating more than 27,000 miles of pipelines and more than 140 terminals.

These pipelines move more than 2 million barrels of gas and petroleum products per day and nearly 9 billion cubic feet per day of natural gas. Its terminals handle more than 80 million tons of coal annually and feature liquid storage capacity of 70 billion barrels, it adds. The company is also a leading provider of CO2 for oil recovery projects throughout the nation.

“We are excited about teaming up with ETP on this project, which will help relieve existing constraints in the Midcontinent, Oklahoma and the Barnett shale,” Kinder Morgan Chairman and CEO Richard D. Kinder said in a statement. “Adding new pipeline access and capacity through projects like MEP is important in meeting America’s future energy needs and limiting future hurricane interruptions to the marketplace. This pipeline project represents another exciting growth opportunity.

“The MEP project is the latest example of pipelines providing shippers in Oklahoma and Texas with much-needed takeaway capacity, flexibility and access to new markets,” ETP Co-Chairman and Co-CEO Ray Davis said in a statement. “We are excited about the opportunity to partner with KMP and the continued implementation of our partnership growth strategy.”

In addition, Chesapeake Energy Marketing anticipates positive results from MEP. “We are pleased to support the MEP project and feel that it provides the best short and long-term option to provide takeaway capacity for Chesapeake’s increasing supplies of gas out of the Midcontinent and Barnett Shale areas,” Chesapeake Energy Marketing Inc. President James C. Johnson said in a statement.

Strategic Assets
Currently, Energy Transfer says its total assets are growing swiftly, and the services it now provides include:

• Natural gas gathering from more than 2,400 producing wells
• Natural gas compression to ease flow from the wells to gathering systems
• Natural gas treating to remove impurities and meet pipeline quality specifications
• Natural gas processing to extract NGLs; the sale of pipeline-quality residue gas after processing; and the sale of NGLs to third parties where they are separated into individual components such as ethane, propane, mixed butanes and natural gasoline
• The transportation of natural gas from the Oasis, TUFCO, Houston Pipeline and Transwestern to end-users, independent power plants, utilities and other pipelines  
• Natural gas storage on its Energy Transfer Fuel and Houston Pipeline assets to service industrial end-users
• The purchase for resale of natural gas from producers connected to systems and from third parties