Williams Partners: Sale of Geismar Olefins Plant Part of Sharper Focus on Natural Gas Business
Williams Partners L.P.'s (NYSE:WPZ) (Tulsa Oklahoma) desire to sell its Geismar olefins plant and complex is in line with the company's sharpened focus on its natural gas businesses, according to Chief Executive Officer Alan Armstrong.
Williams, which holds an 88.5% undivided ownership interest in the Geismar facility, announced Tuesday it was exploring a sale of the plant or securing a long-term, fee-for-service tolling agreement. Williams, which has held an ownership stake in the plant since 1999, expanded the plant's ethylene capacity by 600 million pounds per pound in 2015. It now can produce 1.95 billion pounds of ethylene and 114 million pounds of propylene per year.
Speaking at the Barclay's CEO Energy-Power Conference on Tuesday, Armstrong said Williams prefers to sell the Geismar complex over putting it into a long-term, fee-for-service tolling agreement. He said the Geismar plant was is "extraneous to our business of moving natural gas." The company has placed plans for a potential $2 billion expansion the plant on hold.
The recently announced sale of the Canadian business by Williams Partners and Williams (NYSE:WMB) to Inter Pipeline Ltd. for C$1.35 billion ($1.05 billion) is another example of the company disposing of an extraneous item, he added.
The company's natural gas focused strategy will drive fee-based revenue growth, Armstrong said, which in turn will help reduce volatility of cash flows. Capital spending will be focused on fee-based revenue opportunities, with key infrastructure positions across the natural gas value chain already established, including the 10,200-mile Transco pipeline system, which delivers natural gas from the Gulf Coast to 12 Southeast and Atlantic Seaboard states.
Natural gas demand in the markets served by Transco could grow from roughly 2.5 billion cubic feet per day (Bcf/d) in 2015 to well over 20 billion cubic feet per day by 2025, according to a Wood Mackenzie Limited (Edinburgh, Scotland) chart cited by Armstrong. In addition, he said, Williams Partners has heavily invested in natural gas pipeline projects in the Northeast, where growth in natural gas production from the Marcellus and Utica formations through 2025 is expected to supply 80% of North American demand.
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