Oregon Utility to Invest $250M in Jonah Field Development
Encana Oil & Gas (USA) Inc., a subsidiary of Encana Corp., has completed a benchmark upstream joint-venture development agreement with Northwest Natural Gas Co., a Portland, Oregon-based natural gas distributor.
The Public Utility Commission of Oregon recently approved the agreement that will see Northwest Natural invest about US$250 million over the next five years to earn a working interest in certain sections of Encana's Jonah field in Wyoming. The arrangement provides NW Natural with secure, reliable and economic supplies of natural gas for a portion of the needs of its 674,000 customers.
"This is a landmark agreement and regulatory step that we believe will open the door for future upstream investment by utilities seeking price stability for their customers transactions that are backed by utility ratepayers and supported by regulators as prudent investments. As a leading producer, Encana has heard end-users' requests for structures that provide long-term price security, and under this agreement, we are able to achieve both our customer's goal and efficiently advance the development of a portion of the Jonah field," said Renee Zemljak, Encana's Executive Vice-President, Midstream, Marketing & Fundamentals.
An innovative supply model for a utility
Traditionally, utilities have purchased natural gas on short-term contracts from wholesale markets, with customers subject to fluctuating prices. Under this transaction, in order to reduce price uncertainty for consumers, NW Natural will invest approximately $45 million to $55 million per year for the next five years earning a working interest in certain sections of Jonah natural gas field. This direct producer-utility deal helps secure long-term natural gas supply for NW Natural at the cost of production rather than at future market prices.
"This agreement and the commission's order represent a lot of hard work by a lot of parties over a short period of time, and we are pleased the commission approved the transaction," said NW Natural President and Chief Executive Officer Gregg Kantor. "This is a terrific outcome for both customers and shareholders."
"This transaction is another of Encana's many joint-venture arrangements that provide attractive investment opportunities and reliable, economic supplies of natural gas to a variety of counterparties. These transactions help serve our customers' needs and accelerate the value recognition of Encana's enormous resource potential," Zemljak said.
Joint ventures attract more than $840 million to Encana lands in 2011; other joint ventures available
In the past few years, Encana has established numerous joint ventures in Canada and the U.S., many that involve other natural gas producers, as well as industrial firms and national oil companies. In 2011, joint ventures are expected to result in about $840 million of additional capital investment on Encana lands. Encana recently announced plans to attract new joint venture partners on selected assets in the Horn River basin and its Greater Sierra lands.
Encana is also offering an acquisition opportunity for a portion of its producing Greater Sierra resource play. This new joint venture initiative builds on previous announcements of a farm-out agreement with Kogas Canada Ltd., a subsidiary of Korea Gas Corporation, in the Horn River and Montney formations and a planned joint venture and acquisition by PetroChina International Investment Company Limited of a 50 percent interest in Encana's Cutbank Ridge business assets. RBC Capital Markets and Jefferies & Company, Inc. have been retained by Encana to conduct the potential joint venture and divestiture processes on the Horn River and Greater Sierra assets.
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 Texas and Louisiana. By partnering with employees, community organizations and other businesses, Encana contributes to the strength and sustainability of the communities where it operates. Encana common shares trade on the Toronto and New York stock exchanges under the symbol ECA.
NW Natural is headquartered in Portland, Ore., and provides safe, reliable, cost-effective natural gas service to about 674,000 residential, commercial, and industrial customers through 15,000 miles of mains and service lines in western Oregon and southwestern Washington. It is the largest independent natural gas utility in the Pacific Northwest. The company has approximately $2.6 billion in total assets. The company operates and owns 16 Bcf of underground storage capacity in Mist, Ore., and also operates the designed 20 Bcf Gill Ranch underground storage facility in California, in which it owns a 75 percent undivided interest. Together, NW Natural and its subsidiaries currently own and operate underground gas storage facilities with designed storage capacity of approximately 31 Bcf in Oregon and California.