January 14, 2013

Partnership paves way for LNG facility

APACHE CANADA LTD.

Chevron and Apache Canada are planning to build a massive Liquid Natural Gas (LNG) export facility near Kitimat B.C.

RICHARD GILBERT

staff writer

The proposed Kitimat Liquid Natural Gas (LNG) export facility has taken a major step forward as Chevron Canada Limited signs a series of merger and acquisition transactions to construct the project and develop shale gas in northeastern, B.C.

“This investment grows our global LNG portfolio and builds upon our LNG construction, operations and marketing capabilities,” said George Kirkland, vice chairman, Chevron Corporation.

“It is ideally situated to meet rapidly growing demand for reliable, secure, and cleaner-burning fuels in Asia, which are projected to approximately double from current levels by 2025.”

Chevron Canada Limited signed a broad agreement with Apache Canada Ltd. to acquire all of the interests currently owned by EOG Resources Canada Inc. and Encana Corporation in the proposed Kitimat LNG project.

Encana and EOG Resources were 30 per cent non-operating partners in the project.

Apache and Chevron will each hold a 50 per cent interest in the construction and operation of the Kitimat LNG facility on Bish Cove, about 650 kilometres north of Vancouver.

The transaction includes the Pacific Trail Pipeline, which is a 463-kilometre underground line from the Spectra Energy Transmission pipeline system in Summit Lake, BC to the Kitimat LNG terminal.

Apache will also sell Chevron a 50 per cent interest in 644,000 undeveloped acres in the Horn River and Liard basins for $550 million.

“This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with long-standing relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America,” said G. Steven Farris, Apache’s chairman and chief executive officer.

Under the new joint venture, Chevron will operate the plant and the pipeline, while Apache will operate the upstream assets.

Kitimat LNG is currently completing front-end engineering and design, which will provide the design, construction timelines, costs and labour force requirements for the project.

Early site work is underway.

Construction involves a shoreline LNG tanker berthing and uploading jetty, tug boat berth, several pipelines and the upgrading and extension of the access road.

The construction of the terminal will employ 150-200 people over 18 to 24 months and will cost between $360 million and $450 million.

Once operational, the facility will employ about 30-40 permanent employees.

The facility has an expected capacity of five million tons of LNG per year or about 750 million cubic feet of gas per day.

The LNG export facility will be built on First Nations land under a unique partnership with the Haisla First Nation.

Under the terms of the 49-year lease arrangement between the Kitamaat Village Council, Indian and Northern Affairs Canada, and Kitimat LNG, the Haisla would receive both lease and taxation payments.

Kitimat LNG signed a deal in July 2011 to purchase the former Eurocan industrial site in Kitimat, B.C. from West Fraser Timber in July.

The site provides the Kitimat LNG project with a suitable area for a work camp, lay-down and storage area, as the project continues to move forward with clearing and grading at the LNG export facility site.

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