Williams Partners (NYSE:WPZ) may spend up to $3.2 billion in capital over the next five years to build out the company's operations in the Gulf Coast area, as the company looks to take advantage of the expected growth in oil and gas activity in the shallow and deepwater areas of the Gulf of Mexico.
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Rig activity in the Gulf of Mexico has rebounded sharply since the end of the drilling moratorium imposed by the government because of the BP oil spill. Recent data indicates that the number of rigs drilling in the deepwater Gulf of Mexico is at the highest level in two years, according to Rig Zone.
Williams has an existing network of assets in the Gulf of Mexico and plans to add to this capacity through 2017. This expansion will involve many different types of infrastructure, including oil gathering and handling, natural gas gathering and processing and fractionation.
Williams also believes that the company's assets are set to benefit from several high growth and emerging onshore oil and gas plays that also require infrastructure in order to be developed. These include the Eagle Ford Shale in Texas, and the Tuscaloosa Marine Shale in Louisiana and Mississippi.
Williams completed the Markham processing plant in 2011 to serve the Eagle Ford Shale and is already operating this facility at maximum capacity. The company is considering the construction of a third train at Markham, which would add capacity of 200 million cubic feet per day to this facility.
SEE: A Natural Gas Primer
In the Gulf of Mexico, Williams and partner DCP Midstream Partners (NYSE:DPM) are working on an expansion of the Discovery pipeline system. The Keathley Canyon Connector will gather natural gas from various projects in the deepwater Gulf of Mexico and transport it to onshore. The project is expected to cost $600 million and add 400 million cubic feet per day of capacity. The Keathley Canyon Connector is expected to be in operation approximately by 2014.
Some of the deepwater projects that will use this new gas gathering pipeline include Lucius, under development mainly by Anadarko Petroleum (NYSE:APC), and Hadrian South, operated mainly by Exxon Mobil (NYSE:XOM).
Williams is also building a floating production system (FPS) for Hess (NYSE:HES) at the Tubular Bells project in the Mississippi Canyon area of the Gulf of Mexico. The Gulfstar FPS will provide capacity of 60,000 barrels of oil and 200 million cubic feet of natural gas per day.
The Bottom Line
Williams has big plans for the Gulf Coast, and has many investment opportunities available to take advantage of the future growth in oil and gas activity in in the onshore and offshore parts of this area.
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.