Southern Star Central Gas Pipeline Nearing Construction Phase on Pipeline Expansion

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Southern Star Central Gas Pipeline, Incorporated (Owensboro Kentucky) is holding pre-bid meetings with pipeline contractors to construct its Southwest Missouri Expansion Project. Southern Star has completed the engineering phase of the natural gas pipeline expansion project and is awaiting its final FERC certificate, which it expects to receive in the next two to three weeks. Southern Star expects to construct the $10.5 million 16-mile pipeline this summer. The 20" diameter pipeline will interconnect near the Saginaw Compressor Station near Joplin Missouri.

Southern Star Central Gas Pipeline, Inc is a subsidiary of Southern Star Central Corporation, which is a business unit of AIG Highstar Capital, LP a private equity fund sponsored by American International Group, Inc (New York) (NYSE:AIG).

In September of 2002 Southern Star Central Corporation signed a definitive agreement with Williams Companies (Tulsa Oklahoma) (NYSE:WMB) to purchase 100 percent of the capital stock of Williams Gas Pipelines Central, Inc, which became Southern Star Central Pipeline, Inc. Southern Star paid $380 million in cash and assumed $180 in debt for the 6,000-mile system. Williams reduced its $50 million in planned capital expenditures on the system but had to recognize as well a pre-tax loss of $90 to $95 million on the sale. The Gas Pipelines Central system was the smallest of four systems Williams owns with a daily gas transportation capacity of 2.3 Bcf. Also included in the transaction was the transfer of owner ship of Western Frontier Pipeline Company, LLC to Southern Star.

Western Frontier Pipeline Company LLC (WFPC) does not own a single mile of pipe. What makes WFPC appealing is a new natural gas pipeline project designed to transport Rocky Mountain gas to Mid-Continent markets and further east. The proposed pipeline project entails approximately 380-Miles of 30" diameter pipeline originating in the Cheyenne Hub in northern Colorado and running east into Kansas where six major natural gas pipelines carry natural gas from the basins of the southwest to the market hubs near Chicago. The project has already been filed with the FERC and the initial capacity would be over 500 mmscfd of natural gas, which could be expanded by constructing additional compressor stations beyond the two planned. The capital cost of this project could very well exceed $500 million and the pipe could be in place by the end of 2005.

Industrial Information Resources, Incorporated initially reported on the Southwest Missouri Expansion Project in April of 2002 and the Western Frontier project in December of 2000.