Portland utility to buy Jonah gas at cost of production

By OGJ editors
HOUSTON, May 2 – Encana Oil & Gas USA Inc. completed a joint venture under which a Portland, Ore., utility will advance funds for further development of giant Jonah gas-condensate field in Wyoming, bringing the total capital investment to be attracted to Encana Corp. joint ventures in Canada and the US to more than $840 million in 2011 alone.

More exploration and development joint ventures are available, Encana said. The company lately announced plans to attract partners on selected assets in the Horn River basin and its Greater Sierra lands in Canada. Encana is also offering an acquisition opportunity for a portion of its producing Greater Sierra resource play to build on a farmout agreement with Kogas Canada Ltd., a subsidiary of Korea Gas Corp., in the Horn River and Montney formations and a planned joint venture and acquisition by PetroChina International Investment Co. Ltd. of a 50% interest in Encana’s Cutbank Ridge business assets.

Under the most recent deal, the Oregon Public Utility Commission approved an investment of more than $250 million by Northwest Natural Gas Co. over the next 5 years to earn a working interest in certain sections of Encana’s Jonah field in Wyoming.

Encana said, “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 and fundamentals.

Traditionally, Encana noted, 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, Northwest Natural will invest $45 million to $55 million/year for 5 years to earn a working interest in parts of Jonah. The direct producer-utility deal helps secure long-term natural gas supply at the cost of production rather than at future market prices.