Occidental Petroleum, DCP Midstream Sign TX Liquids Agreement

June 2011 Vol. 238 No. 6

Occidental Petroleum Corporation (Oxy) announced its wholly owned subsidiary Occidental Chemical Corporation (OxyChem) has signed a preliminary agreement with DCP Midstream LLC (DCP) for the supply and transport of natural gas liquids in Texas.

The preliminary agreement allows Oxy to immediately move forward with a feasibility study for a proposed NGL fractionator in Ingleside, Texas. The fractionator separates NGLs into base components, including propane, butane and ethane. The project will add significant value to Oxy’s growing NGL production from the Permian Basin as well as Oxy’s recently acquired assets in South Texas.

The proposed fractionator site, which is adjacent to OxyChem’s world-class chloro-vinyls complex in Ingleside, is strategically located to meet the growing export demand for propane and butane to Latin America and other countries. The location also allows Oxy to optimize the use of its own NGL production and secure additional supply of NGL from the prolific Eagle Ford Shale basin.

Under the agreement, Oxy would facilitate the development of DCP’s Sandhills Pipeline, which would connect the Permian and Eagle Ford Shale basins to the NGL hub at Mont Belvieu, Texas, by granting access to Oxy’s pipeline corridor from the Houston Ship Channel to Mont Belvieu. In addition, Oxy may receive NGL supply from DCP, and the Sandhills Pipeline will support Oxy’s increased production from its Texas operations.

OxyChem’s Ingleside plant is a large consumer of ethylene and the fractionator development will also allow Oxy to explore various options for future supply of ethylene for the Ingleside plant. Oxy expects to complete the feasibility study in late 2011. If approved, the project could begin operating in 2015.