AltaGas Ltd. has entered into a $230-million (Can.) definitive agreement with Black Swan Energy Ltd. to acquire 50% interest in Black Swan’s existing and future Aitken Creek natural gas processing operations in the Montney area of northeastern British Columbia. Both companies are headquartered in Calgary.
Upon the completion of the acquisition, AltaGas and Black Swan will enter into a long-term agreement for Black Swan’s use of the AltaGas processing capacity on a cost-of-service basis at the Aitken Creek processing installations, which will be underpinned by a reserve dedication and area of mutual interest encompassing 30% of the Black Swan Montney lands as well as a priority of fill arrangement for AltaGas capacity ownership in the Aitken Creek operations, the companies said in separate releases.
Alongside the processing agreement, AltaGas and Black Swan—which will continue to operate the North Aitken Creek processing complex—also entered transportation and marketing arrangements that will provide AltaGas with long-term NGL dedication to AltaGas’ liquids-handling infrastructure and North Pine field fractionation plant, as well as corresponding propane marketing arrangements.
The initial term of the commercial arrangements is 15 years and will provide both parties with an option to extend through additional gas processing investments.
The 50-50 infrastructure joint-venture, combined with existing and new AltaGas-owned and operated liquids-handling infrastructure, will further strengthen AltaGas’ Northeast BC-energy export strategy that includes gas processing, liquids handling, field fractionation, and propane export via the company’s Ridley Island Propane Export Terminal (RIPET), AltaGas said (OGJ Online, May 12, 2017).
“This joint venture with Black Swan further strengthens our position and capture area in one of the most prolific natural gas basins in North America and showcases our competitive position in gas processing and export,” said David Cornhill, chairman and interim co-chief executive officer of AltaGas.
“The combined commitments from Black Swan and the recently announced Kelt Exploration Ltd. arrangement [under which Kelt entered into a letter of intent with AltaGas for firm processing of 75 MMcfd of raw gas under a 10-year take-or-pay arrangement at AltaGas’ proposed and already permitted 99-MMcfd (expandable to 198 MMcfd) C3+ deep-cut gas processing plant at AltaGas’ existing Townsend site, which is scheduled to be constructed and on stream by fourth-quarter of 2019] triggers an expansion of our North Pine C3+ fractionation capacity from the current 10,000 b/d to the permitted and approved 20,000 b/d [capacity],” Cornhill added.
With this agreement and other initiatives AltaGas is pursuing, total propane supply for RIPET is expected to achieve the initial 40,000 b/d target, Cornhill said.
The companies said they expect to close on the transaction in early October, subject to satisfaction of customary closing conditions.
Raw gas processing
Under terms of the commercial arrangements, AltaGas will acquire 50% ownership in the existing 110-MMcfd North Aitken Creek gas plant and in Black Swan’s 100-MMcfd Aitken Creek gas plant currently under construction.
Additionally, AltaGas will have the option to participate in two future plant phases, including the potential for enhanced liquids recoveries which could more than double the NGL output of the Aitken Creek processing operations.
The investment in the Aitken Creek processing business includes $136 million in 2018 and an estimated $50 million in fourth-quarter 2019, AltaGas said.
The Aitken Creek processing installations will have an estimated 210 MMcfd (gross) operational capacity with the potential for future expansions to increase processing capacity up to 360 MMcfd (gross).
Liquids handling, field fractionation
Black Swan will enter into an arrangement that includes existing and new AltaGas-owned and operated infrastructure. Existing infrastructure Black Swan will use includes AltaGas' liquids pipelines from Townsend to North Pine, as well as fractionation and terminalling at North Pine.
The new infrastructure will include liquids pipelines from North Aitken Creek to Townsend and liquids handling at Townsend that will require a capital investment of $40 million in 2019, according to the companies.
Energy exports
Black Swan and AltaGas additionally will enter into marketing arrangements under which more than 50% of Black Swan’s North Pine propane production will be exported through RIPET and will receive premium Far East Index pricing under a long-term arrangement.
The marketing arrangements also include an option for Black Swan to increase the term and volume of its RIPET commitment throughout the term of the upstream processing arrangements.
Contact Robert Brelsford at [email protected].