March 16, 2000
JOURNAL STAFF REPORT
Shell Exploration & Production Co. has signed a purchase and sales agreement to sell its 80-percent interest in Shell CO2 Co, Ltd., to Kinder Morgan Energy Partners.
Kinder Morgan has held a 20-percent limited-partnership interest in the company since 1998.
The transaction, valued at $185.5 million, involves the sale of a 78-percent limited-partnership interest as well as a 2-percent general-partnership interest.
Closing is expected to take place in four to six weeks, said Rich Hansen, manager of Shell E&P.
"Kinder Morgan just wants to ‘look under all the rocks’ before the final sale to make sure there is nothing bad," Hansen said.
He said there is expected to be little effect on the Cortez community and the county’s economy. Kinder Morgan, a rapidly-growing energy business based in Houston, Texas, wants to expand the CO2 business, he said.
Shell is Montezuma County’s largest taxpayer. The oil and gas industry pays about 32 percent of the county’s property taxes, according to County Administrator Tom Weaver, and Shell pays by far the largest portion of that amount.
Shell was also active in community programs, donating about $25,000 each year to local organizations as well as volunteering staff time to career programs in local schools, Hansen said. While Kinder Morgan will be free to make its own decisions about donations and community programs, Hansen said he’ll encourage them to continue as many as possible.
"What the new company will do is difficult to say, but I’m going to sit down with them and go over the donations and the ‘Choices’ program," he said. "It’s kind of an open question, but I’ve got to assume they’re going to continue at least some of the programs."
The company has been producing carbon dioxide from the McElmo Dome area since 1983. Since then more than 3.3 trillion cubic feet of CO2 has been produced from the field.
Shell’s share of present production rates from the McElmo Dome Unit is approximately 400 million cubic feet per day. The gas is carried via a 500-mile pipeline to the Permian Basin in west Texas and eastern New Mexico, where it is used to help pump more oil out of partially depleted wells.
About 30 million cubic feet per day of the gas is piped to a facility in Aneth, Utah.
In 1998, the Permian Basin produced approximately 1 million barrels of oil per day — about 20 percent of the total U.S. oil production outside of Alaska – and more than 15 percent of that production was attributable to carbon-dioxide flooding.
Hansen said the sale of Shell CO2 had nothing to do with pending legislation regarding the Mc Elmo Dome area.
"We announced the intent to sell in November of 1998, and Babbitt visited in May of last year, so they were totally separate issues," Hansen said. "But we continue to work with Gene Story and are 150 percent in favor of the national conservation area legislation.
"If the national conservation area legislation doesn’t pass, it’s going to be very difficult to continue developing the natural resources from that area."
Shell CO2 has about 25 employees in its Cortez operation,, and Kinder Morgan plans to try to retain as many of those employees as practical, according to a news release from Shell.
The sale includes carbon-dioxide reserves in the McElmo Dome and Doe Canyon source fields in Colorado, interests in the Bravo Dome source field in New Mexico, and the Cortez, Bravo, and Central Basin pipelines.