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Kitimat LNG to be majority owned, operated by Apache unit

Warren R. True
Chief Technology Editor-LNG/Gas Processing

HOUSTON, Jan. 15 -- Kitimat LNG Inc., which plans to export natural gas via an LNG plant in British Columbia, has sold a majority interest in the export project to Apache Canada Ltd., a unit of Apache Corp. Apache also reserved 51% of planned export capacity.

The planned Kitimat project, at Bish Cove near the Port of Kitimat about 405 miles north of Vancouver, has planned capacity of about 700 MMcfd, or 5 million tonnes/year of LNG. First LNG shipments are projected for 2014. Apache will become operator of the project.

Americas’ LNG
If built, Kitimat will become the fourth liquefaction plant in the Americas:

• The 1.3-million tpy Kenai, Alas., plant, operated by ConocoPhillips, started up in 1969. All of Kenai’s production since its start up has gone to Japan, the world largest importer of LNG. Kitimat is similarly targeting Asian markets.

• The combined 15.1-million tpy plants at Point Fortin, Trinidad and Tobago. All trains started up 1999-2005. Atlantic LNG is a major supplier to the US.

• The 4.4-million tpy plant at Melchorita, Peru, is undergoing commissioning and will start up by spring.

Kitimat will link pipelines serving Western Canada's gas production via the proposed Pacific Trail Pipelines, a $1.1-billion (Can.), 300-mile project originating at Summit Lake, BC. Through acquisition of a 51% interest in Kitimat, Apache will acquire a 25.5% interest in the pipeline, currently a 50-50 partnership between Galveston LNG and Pacific Northern Gas Ltd.

The proposed pipeline has received both the federal and provincial governments’ environmental assessment approvals and has an arrangement to work with First Nations along the pipeline route, said Apache.

Kitimat LNG has signed memorandums of understanding for LNG sales with Gas Natural and Korea Gas Corp., as well as MOUs with other producers for natural gas supply.

FID 2011
The Apache announcement said preliminary construction cost estimates of $3 billion (Can.) “will be refined” after front-end engineering and design. Kitimat LNG received its provincial environmental certificate for the liquefaction plant in December 2008 and federal environmental certificate in January 2009.

Apache Chairman and Chief Executive Officer G. Steven Farris said in the announcement that development of Kitimat LNG can “open new markets in the Asia-Pacific region for gas from Apache's Canadian operations, including the Horn River basin in northeast British Columbia,” where its net estimated resource potential “exceeds” 10 tcf.

Under the agreement, Apache will make an initial payment to current owners of Kitimat LNG with “additional consideration due upon achievement of certain commercial and regulatory milestones,” the company said. Apache will fund the project's FEED, set to begin shortly, with final investment decision expected in 2011.

Contact Warren R. True at warrent@ogjonline.com.


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