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

ONEOK Partners LP (NYSE: OKS) has entered into a 50-50 joint venture with a subsidiary of Fermaca Infrastructure BV, 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. 

The project, to be constructed in phases, includes 200 miles of new 30-inch-diameter pipeline currently designed to transport up to 640 million cubic feet per day (MMcf/d) of natural gas, with up to 570 MMcf/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 Dec. 2, 2014, to Dec. 26, 2014. Additional capacity could become available through future expansions depending on the demands of the market.

The first phase of the pipeline project for 170 MMcf/d of available capacity is expected to be completed by the first quarter of 2016. The second phase, which will increase the pipeline's available capacity to 570 MMcf/d, is expected to be completed in the first quarter of 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 MMcf/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 $450 million to $500 million.

ONEOK WesTex Transmission is an intrastate natural gas pipeline system operating within Texas, consisting of approximately 2,227 miles of pipeline. This project is subject to receipt of customary governmental approvals.

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