Report Volume XXIII, Number 7, December 1st, 2011

INDUSTRY NEWS (Houston, TX) – Enterprise Products LP and Enbridge Inc. are planning to build what could be the largest pipeline connecting the oil-storage hub of Cushing, Okla., to refiners on the Gulf Coast, the companies said Thursday.

The newly proposed Wrangler pipeline, with an initial capacity of 800,000 barrels a day, would compete with a 500,000-barrela- day pipeline being planned by TransCanada Corp. and Magellan Midstream Partners’ Longhorn pipeline, which would bypass Cushing to deliver up to 225,000 barrels a day of crude oil from revived oil fields in west Texas to the Gulf Coast.

The new pipeline project is the latest entrant in the race to be the first to supply refiners in Texas and Louisiana with low-cost crude oil from Cushing, where a supply glut had occurred amid a boom in inland U.S. and Canadian oil production.

Pipeline companies charge tolls on every barrel of oil shipped along their lines, a huge incentive for them to give Gulf Coast refiners direct access to Cushing’s bounty.

Cushing oil inventories hit a high of nearly 41.9 million barrels on April 18, nearly 30% higher than the year before, according to the U.S. Energy Information Administration. The glut has since subsided-inventories are now about 10% below year-ago levels— but increasing North American oil production is expected to keep Cushing oil prices about $20 a barrel lower than for oil available on the East and West coasts.

If all three pipeline projects are built, a total of 1.5 million barrels a day would be added to the pipeline capacity leading to the Gulf Coast within the next two years. Some analysts questioned whether so much capacity is needed.

But refiners in the region will be happy to have it, said Mark Routt, senior consultant at KBC Advance Technologies Inc. Refineries with a combined capacity of about 4.5 million barrels a day would have access to the three pipelines, he said.

“There’s a hue and cry across the land to get that crude to the coast,” Mr. Routt said. To build Wrangler, Enbridge and Enterprise would essentially combine projects that had been faltering in the face of the competition. Enbridge said the Wrangler project will supersede its proposed Monarch pipeline, a planned 350,000-barrel-a-day pipeline to Houston from Cushing that had just finished the initial engineering phase as of July.

“Wrangler is designed to meet the needs that Monarch was designed for,” Enbridge spokeswoman Jennifer Varey said.

For Enterprise, the Wrangler would replace its failed Double-E project, a partnership it formed with Energy Transfer Partners LP to build a 450,000-barrel-a-day pipeline to connect Houston to Cushing. That project fell apart in August because of insufficient commercial interest.

Enterprise spokesman Rick Rainey said the new line would offer refiners greater capacity than the failed Double-E and reach refiners outside the immediate Houston area.

“It’ll have more capacity, more flexibility to handle heavy or light crudes and serve multiple refinery areas,” he said. Mr. Rainey declined to say how much the Wrangler line would cost.

Enbridge and Enterprise will seek commitments for the pipeline starting next week. If enough shipper interest is expressed, the pipeline could start service in mid-2013, the companies said.

INDUSTRY NEWS (Houston, TX) – Enterprise Products Partners L.P. and Chesapeake Energy Corporation announced in November they have entered into a long-term contract whereby Chesapeake would anchor Enterprise’s proposed longhaul ethane pipeline from the Marcellus and Utica shale regions in Pennsylvania, West Virginia and Ohio to the U.S. Gulf Coast.

The approximately 1,230- mile pipeline would have an initial capacity of 125,000 barrels per day of ethane and could be quickly expanded through a combination of additional pumping horsepower and pipeline looping. The committed shipper transportation rate would range between 14.5 cents per gallon and 15.5 cents per gallon. Through connections at the partnership’s natural gas liquids (”NGL”) storage complex in Mont Belvieu, Texas, ethane production from the Marcellus and Utica shales would ultimately have direct or indirect access to every ethylene plant in the U.S. The pipeline could begin commercial operations in the first quarter of 2014.

“The addition of this new pipeline would provide producers in the quickly expanding Marcellus Shale play, as well as the emerging Utica Shale, with much-needed midstream infrastructure to facilitate production of NGLrich natural gas and provide shippers with access to the highest value markets on the U.S. Gulf Coast for their ethane,” said Michael A. Creel, president and chief executive officer of Enterprise’s general partner. “We have also built facilities to serve the petrochemical industry on the Gulf Coast as it continues to expand its demand for priceadvantaged domestic ethane to displace more expensive imported crude oil derivatives.”

INDUSTRY NEWS (Houston, TX) – Spectra Energy said recently its subsidiary Texas Eastern Transmission LP received approval from the Federal Energy Regulatory Commission to move forward with a natural gas pipeline expansion project in the northeastern U.S.

With FERC’s approval, the Houston-based energy company can begin construction on its Texas Eastern Appalachia to Market expansion project.

During the project, Spectra will install more pipeline to carry natural gas from the Appalachian and Marcellus shale formations in Pennsylvania to markets throughout the Northeast.

When the project is completed in 2012, the expanded pipelines will carry up to 200 million more cubic feet of natural gas per day.

In the future, Spectra said has plans to install more pipeline and pipeline interconnections to transport natural gas from northeast shale formations to customers in nearby regions.

INDUSTRY NEWS (Cleveland, OH) – Lincoln Electric has added Innershield® NR-440Ni2 to its portfolio of premium selfshielded, flux-cored consumables. This product provides lowtemperature impact toughness in a variety of offshore applications.

Key features:
Designed for optimal weldability in narrow TKY joints and poor fit-up conditions

Features excellent toe wash-in and a flat bead face appearance Meets H8 diffusible hydrogen requirements over a range of humidity levels

Hermetically sealed in ProTech® packaging for moisture resistance

Innershield® NR-440Ni2 meets the most demanding requirements for offshore welding. With premium weldability and excellent toe wash-in, the wire is capable of delivering a flat bead face when used in vertical-up or vertical-down welding applications.

The electrode conforms to AWS 5.29/A5.29M:2010 E71T8-Ni2- JH8 and is ABS, DNV, and LR approved.

Innershield® NR- 440Ni2 also maintains low, H8 diffusible hydrogen levels over a range of humidity. Innershield® NR-440Ni2 is available in 5/64 in. (2.0 mm) wire diameter on14 lb. coils. The product is hermetically sealed in Lincoln Electric’s 56 lb. vacuum sealed pails to protect against moisture and ensure to reliable performance.

To request a copy of Lincoln Electric’s Innershield® NR-440Ni2 product literature, call (888) 355-3213 or visit www.lincolnelectric.com to obtain bulletin C3.2000.5.

INDUSTRY NEWS (Newport Beach, CA) – The Federal Energy Regulatory Commission (FERC) recently approved the application of Tricor Ten Section Hub, LLC to construct and operate a new underground natural gas storage project near Bakersfield, CA. The Ten Section Hub facility is designed to hold 32.5 Bcf of gas, of which 22.4 Bcf is working gas, and will offer customers up to four-turns of high-speed deliverability. Ten Section Hub will offer up to 1.0 Bcf per day of withdrawal service and up to 0.8 Bcf per day of injection service, which will significantly improve the overall efficiency and effectiveness of the Western interstate gas transportation network. Furthermore, by virtue of its strategic location to both the Western and Southwestern United States, Tricor is centrally positioned at the backbone of interstate and intrastate pipeline systems with over 4.0 BCF per day of interstate and intrastate pipeline capacity surrounding it. Tricor Energy is an independent energy company that produces, transports,and sells natural gas and oil from its fields in California.

When completed, the Ten Section Hub facility will provide unconstrained access to reliable, predictable natural gas to markets located in the Western US. Tricor will allow gas marketers, gas utilities and power generators to meet their energy demands as well as those of their residential, commercial, and industrial customers, while reducing price volatility. In addition to providing 32.5 Bcf of storage field capacity with a working capacity of 22.4 Bcf, the certificate issued by FERC authorizes Tricor to construct a 21-mile-long, 36-inch diameter bi-directional pipeline at Wheeler Ridge. Subsequent interconnections to the PG&E and SoCal intrastate pipelines will facilitate further storage offerings to intrastate and interstate customers. Southern California Gas Company’s Line 225 also connects directly to the Kern River-Mojave interstate pipeline at Wheeler Ridge. PG&E’s 34-inch 300A and 300B South to North lines have the capacity to deliver large volumes of gas into the San Francisco load center. The 9-mile, 34-inch intrastate Gosford Crossing transmission line, which is jointly owned by SoCal and PG&E, runs directly across the Tricor Ten Section Property, connecting SoCal’s 225 line to PG&E’s 300A & 300B.

Chris Kunzi, Tricor’s Vice-President stated that Tricor is extremely pleased with the certification action taken by the FERC. Mr. Kunzi added that following construction and operation, the storage facility will be able to provide significant new natural gas infrastructure in order to satisfy both existing and future energy demands of residential, commercial, industrial and power generation customers located in the Western US. In addition to providing reliable safe and clean burning natural gas at stabilized prices in the Western region of the US, the construction and operation of the Ten Section Hub storage facility will also serve to fuel the local economy. It is anticipated that the project will cost several hundred million dollars and during construction result in adding over 200 new jobs to the local economy as well as generating several million dollars in additional state tax revenue. Mr. Kunzi noted that the FERC approval of Tricor’s certificate dramatically highlights the need for additional storage capacity in the Western US and Tricor stands ready to bring the new Hub storage deliverability to western natural gas markets in order to serve a diverse customer base, and mitigate the results of shortages of natural gas caused by supply or severe weather conditions.