Chevron Canada Ltd. plans to acquire a 50% state in the Kitimat LNG project and proposed Pacific Trail Pipeline (PTP) and a 50% interest in 644,000 acres in the Horn River and Liard basins in British Columbia. The sellers involved are EOG Resources Canada Inc., Encana Corp., and Apache Corp.
The companies didn’t disclose the amount Chevron agreed to pay for stakes in the planned LNG export terminal and the shale-gas discoveries in northern British Columbia.
Analysts said net proceeds to Apache were estimated at $400 million. Kitimat is not expected to become operational until 2016 at the earliest.
The proposed two-train Kitimat LNG project is progressing through the front-end engineering and design phase. It has a license from the Canadian National Energy Board to export 10 million tonnes/year of LNG. The 290-mile PTP system will provide a direct connection between the Spectra Energy Transmission pipeline system and the Kitimat LNG terminal.
Subject to regulatory approvals, Chevron Canada plans to acquire all interest currently owned by affiliates of EOG Resources Canada and Encana in Kitimat and PTP. After that Chevron Canada will equalize interests with an Apache subsidiary, resulting in Chevron Canada and Apache each holding 50% interest in both the Kitimat LNG project and PTP.
Additionally, Chevron Canada will acquire 110,000 net acres in the Horn River basin from Encana, EOG, and Apache along with 212,000 net acres in Liara basin from Apache. Chevron Canada and Apache each will hold 50% interest, and Apache will operate the two natural gas developments.
Randy Eresman, Encana’s president and chief executive officer, said the Chevron investment represents a key step in the development of LNG export from Western Canada.
“Our main goal since we first acquired an interest in Kitimat LNG almost 2 years ago was to help ensure the progression of this project towards its development,” Eresman said. “While we are no longer a direct participant in this project, we continue to support LNG export as vital to diversifying markets for North American natural gas.”
G. Steven Farris, Apache’s chairman and chief executive officer, said Chevron is a premier LNG developer with relationships in key Asian markets.
“Chevron is the preferred coventurer to join Kitimat LNG,” Farris said. “Apache has a proven record in finding and developing shale gas resources in Canada and is the logical operator for the upstream elements of the joint venture.”
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