Enbridge Inc, the North American pipelines company, has signed an accord with two equity fund-linked firms and MPLX LP, a unit of Marathon Petroleum, to form a venture to develop, construct and operate natural gas pipeline and storage assets connecting Permian Basin supply to growing LNG and US Gulf Coast demand.
The joint venture will be owned by the WhiteWater and I Squared firms with a 50.6 percent stake, MPLX with 30.4 percent and Enbridge with 19.0 percent.
There assets base is widespread and strategic across the Texas gas hubs.
The assets include 100 percent interest in Whistler pipeline, a 450-mile, 42-inch intrastate pipeline transporting natural gas from an interconnect with the Waha Header in the Permian Basin to Agua Dulce in Texas, near to the starting point of the proposed Rio Bravo pipeline and LNG plant.
NextDecade project
They will also own a 100 percent interest in the Rio Bravo pipeline project comprising 137 miles of new 42-inch and 48-inch pipelines transporting natural gas from the Agua Dulce supply area to NextDecade's Rio Grande LNG export project in Brownsville, Texas.
The joint venture will additionally own a 70 percent interest in the in Agua Dulce-to-Corpus Christi (ADCC) pipeline, a 40-mile, 42-inch proposed intrastate pipeline designed to transport 1.7 billion cubic feet per day of natural gas from the terminus of the Whistler pipeline in Agua Dulce to Cheniere Energy’s Corpus Christi LNG export facility.
The ADCC pipeline is expected to be in-service in the third quarter of 2024 and is expandable up to 2.5 Bcf per day.
Enbridge, based in Calgary, Alberta, noted that around 98 percent of capacity in the venture is contracted under long-term, take-or-pay contracts with an average contract length greater than 10 years.
The final part of the venture is a 50 percent interest in Waha Gas Storage, a 2.0 Bcf gas storage cavern facility, with additional topside infrastructure capable of making injections and withdrawals.
“Upon closing of the transaction, Enbridge will contribute its wholly-owned Rio Bravo pipeline project and US$350 million in cash to the joint venture, and will fund the first US$150M of the post-closing capex to complete the Rio Bravo pipeline project,” said a statement.
Investment grade
“Enbridge will receive a 19 percent equity interest in the joint venture and retain a 25 percent economic interest in the Rio Bravo pipeline project, subject to certain redemption rights of the joint venture partners.” it added.
The counterparties in the venture are mostly investment grade and include leading operators in the Permian Basin.
“This is a great way to enhance our super-system approach, bringing energy supply to places where it is needed most and providing last mile connectivity to domestic and export customers,” said Cynthia Hansen, President of Gas Transmission and Midstream at Enbridge.
Enbridge will be contributing its Rio Bravo pipeline project, which will extend the joint venture's current infrastructure to serve LNG and other customers on the US Gulf Coast.
Enbridge's share of the post-closing capex to complete the Rio Bravo pipeline project will be 100 percent of the first US$150M and thereafter proportionate to its aggregate economic interest in that project.
“The transaction optimizes our investment capacity by increasing the efficiency of our capital,” said Pat Murray, Chief Financial Officer of Enbridge.
“We will begin receiving immediate cash flow and will share in future growth opportunities,” Murray stated.
“Having access to new Permian natural gas infrastructure enhances and increases the visibility of our medium-term growth outlook, while being accretive to our balance sheet,” he concluded.
The joint venture agreement is expected to close in the second quarter of 2024, subject to receipt of required regulatory approvals and the satisfaction of other customary closing conditions.
