Apache, EOG Welcome Encana to Kitimat LNG

Kitimat LNG facility partners Apache Corporation and EOG Resources, Inc., through their Canadian subsidiaries, on Friday announced that Encana Corp. (Encana) has agreed to acquire a 30 percent working interest ownership in the planned natural gas liquefaction and export facility on British Columbia's west coast and the associated Pacific Trail Pipelines (PTP). Under the new ownership agreement, Apache will sell down 11 percent of the equity in Kitimat LNG and PTP, retaining operatorship and a 40 percent working interest. EOG will sell 19 percent, keeping a 30 percent working interest. Financial terms of the contract were not disclosed.

"Encana is a natural partner with Apache and EOG for the Kitimat project. All three companies have a significant presence in the Horn River Basin as well as extensive experience in British Columbia natural gas plays, which provides additional operating and commercial synergies for development of this vital energy resource," said Janine McArdle, president of Kitimat LNG and senior vice president-gas monetization, Apache Corporation.

Renee Zemljak, Encana's executive vice-president, midstream, marketing and fundamentals, said: "Encana is excited to join a leading-edge export project that has the potential to advance the North American natural gas industry and supply the growing global demand for LNG by serving a diverse market in the Pacific Rim."

Marketing discussions are under way with potential Asia-Pacific LNG customers. The partners expect to have firm sales commitments in place by the time a final investment decision is made near the end of 2011. Initial shipments of LNG are expected to begin in 2015.

Apache Canada, EOG Canada and Encana plan to build the Kitimat LNG facility on IR#6 Bish Cove, approximately 650 kilometers (400 miles) north of Vancouver. The facility is planned to be built on First Nations land under a unique partnership with the Haisla First Nation. The initial phase of the facility has a planned capacity of approximately 5 million metric tonnes per annum or the equivalent of nearly 700 million cubic feet per day. PTP is planning to build a 463-kilometer (287-mile), 914-mm (36-inch) diameter underground line from Summit Lake, B.C. to Kitimat. Pacific Northern Gas Ltd. (PNG) will operate and maintain the planned pipeline under a seven-year agreement with Apache Canada, EOG Canada and Encana, with provisions for five-year renewals. Apache Canada, EOG Canada and Encana have also agreed to 20-year transportation service arrangements requiring them to use a portion of PNG's current pipeline capacity.

Key milestones for the Kitimat LNG project include:

  • March 2011 — Apache and EOG welcome Encana to the Kitimat LNG development
  • March 2011 — Kitimat LNG front-end engineering and design awarded to KBR
  • March 2011 — Apache and EOG acquire all of Pacific Trail Pipelines
  • December 2010 — Apache files Canadian Federal Export License Application
  • December 2010 — EOG closes agreement on purchase of 49 percent of project
  • November 2010 — Documents fully executed for land leases with related agreements
  • November 2010 — Haisla First Nation votes overwhelmingly to approve land leases
  • May 2010 — EOG Resources Canada signs pre-acquisition agreement to purchase remaining 49 percent of project
  • January 2010 — Apache purchases 51 percent of project and becomes operator
  • August 2006 — Canadian federal environmental assessment decision statement received
  • June 2006 — Canadian provincial environmental assessment approval

Apache Corp. is an oil and gas exploration and production company with operations in the United States, Egypt, the United Kingdom North Sea, Australia and Argentina, in addition to Canada.

EOG Resources Canada Inc. is a wholly owned subsidiary of EOG Resources, Inc., one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, Trinidad, the United Kingdom and China.

Encana is a leading North American natural gas producer that is focused on growing its strong portfolio of natural gas resource plays in key basins from northeast British Columbia to east Texas and Louisiana.