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Encana, CNPC to speed BC gas developments

By OGJ editors
HOUSTON, June 25
-- Encana Corp. and China National Petroleum Corp. signed a heads of agreement under which they would negotiate a joint venture to develop Encana’s Northeast British Columbia gas plays.

Encana would remain operator of the Horn River, Greater Sierra (Jean Marie formation), and Cutbank Ridge (Montney formation) developments. It said the joint venture would take months to negotiate.

Encana has attracted commitments of more than $4 billion of joint venture capital the past 3 years through multiple agreements in Canada and the US, of which about $900 million is to be invested in 2010. Encana targets joint venture investments of $1-2 billion/year.

Encana said a joint venture with CNPC “could contribute significantly towards achieving that investment target,” but didn’t give any proposed investment figure for CNPC. It said the potential joint venture would lower costs, reduce risks, increase capital efficiencies, improve returns, optimize production techniques, and tap natural gas opportunities that would otherwise remain dormant for some time.

Encana would be the operator of all developments, drill and complete the wells, build the processing facilities and pipelines, and conduct all field work for the joint venture. CNPC would invest capital to earn an interest in the assets and gain an advanced understanding of unconventional natural gas development through the sharing of technical knowledge.

Encana said it has more than 7.5 million net acres of undeveloped land in North America. Based on an independent assessment of the company’s proved reserves and highest-quality economic contingent resources, Encana has estimated that its resource potential is more than sufficient to support the company’s long-term goal of doubling production per share in the next 5 years.

The assets are large enough to support 23,000 drilling locations, an 18-year inventory at the company’s current pace of development.

Encana said, “Our proved reserves and highest-quality economic contingent resources represent just the tip of the iceberg when it comes to what we ultimately expect to develop on our existing resource base. A sizeable portion of our company’s future resource potential resides on our extensive lands in northeast British Columbia.”

In northeast British Columbia, Encana’s Greater Sierra key resource play holds about 275,000 net acres of land covering the Devonian shale formation in its Horn River play and about 1.7 million net acres covering the Jean Marie formation. Encana’s Cutbank Ridge key resource play holds about 720,000 net acres of land covering the Montney formation. First quarter 2010 production from the plays was about 535 MMcfd of gas equivalent.

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