ONEOK Partners and Fermaca to construct pipeline from West Texas to Mexico

ONEOK Partners, L.P. has entered into a 50-50 joint venture with a subsidiary of Fermaca Infrastructure B.V. (Fermaca), a Mexico City-based natural gas infrastructure company, to construct a pipeline that would transport natural gas from the Permian Basin in West Texas to Mexico.

The Roadrunner Gas Transmission pipeline project extends from ONEOK Partners' ONEOK WesTex Transmission natural gas pipeline system at Coyanosa, Texas, west to a new international border-crossing connection at the US and Mexico border near San Elizario, Texas, where it will connect with Fermaca's Tarahumara Gas Pipeline.

"We are pleased to partner with Fermaca on this strategic pipeline project and about the opportunity to add to our extensive 36 000 mile integrated network of natural gas and natural gas liquids pipelines," said Terry K. Spencer, President and Chief Executive Officer of ONEOK Partners.

The project, to be constructed in phases, includes approximately 200 miles of new, 30 in. dia. pipeline currently designed to transport up to 640 million ft3/d of natural gas, with up to 570 million ft3/d to be transported to Mexico's growing markets. Precedent Agreements representing the initial design capacity have been executed with the Comisión Federal de Electricidad (CFE), Mexico's national electric utility, and a subsidiary of Fermaca. All transportation agreements will be firm (take-or-pay) and have a term of 25 years. Roadrunner was fully subscribed in its initial design through an open season process that ran from 2 December, 2014, to 26 December 2014. Additional capacity could become available through future expansions depending on the demands of the market.

"ONEOK Partners' strategically integrated assets position us well to provide this service to the CFE and the expanding natural gas markets in Mexico. We look forward to building a long-term, strategic relationship with the CFE and to this project meeting the ongoing demand needs of the large natural gas consumers in Mexico," added Spencer.

"We see Roadrunner as a gateway asset that will connect Mexico's rapidly growing natural gas markets with US producers in the developing Permian Basin. The pipeline will connect with ONEOK Partners' extensive existing natural gas pipeline and storage infrastructure in Texas and create a platform for future cross-border development opportunities. These integrated assets also will provide markets in Mexico access to upstream supply basins in West Texas and the Mid-Continent, which adds location and price diversity to their supply mix and helps CFE replace fuel oil-based power plants with natural gas-fueled power plants, which are friendlier on the environment and less expensive," concluded Spencer.

The first phase of the pipeline project for 170 million ft3/d of available capacity is expected to be completed by the first quarter 2016. The second phase, which will increase the pipeline's available capacity to 570 million ft3/d, is expected to be completed in the first quarter 2017. The third and final phase of the project is expected to be completed in 2019 and will increase available capacity on the pipeline to 640 million ft3/d. ONEOK Partners will manage the construction of the project and will be the operator of the pipeline upon its completion. The estimated cost of the project is approximately US$450 - 500 million.

"The signing of this joint venture agreement with ONEOK Partners is another key step in Fermaca's plans to extend its network of gas pipelines across Mexico and into the US," said Manuel Calvillo Alvarez, Chief Operating Officer and Executive Vice President of Fermaca. "A confluence of factors, including ambitious growth targets, a favorable regulatory and political framework, and an abundance of planned projects mean that it is a great time to be investing in the build-out of natural gas infrastructure in and around Mexico. In ONEOK, we have found a partner that recognises the Mexican opportunity, and we really look forward to working with them."

Fermaca, a leading gas infrastructure player in Mexico, develops, builds, owns and operates pipelines and other related energy assets in the country. The company's gas transportation customers include Mexico's largest energy companies. Its current operating pipelines are capable of transporting 1.2 billion ft3/d, which constitutes approximately 20% of Mexico's natural gas supply.

ONEOK WesTex Transmission is an intrastate natural gas pipeline system operating within Texas, consisting of approximately 2227 miles of pipeline. This project is subject to receipt of customary governmental approvals.

Adapted from press release by Hannah Priestley-Eaton

Published on 07/04/2015


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