Apache, an oil and gas exploration and production company, will acquire 51% of Kitimat LNG's planned liquefied natural gas (LNG) export terminal in British Columbia, Canada. The company also reserved 51% of capacity in the terminal.
The proposed Kitimat project has planned capacity of about 700MMcf of natural gas per day, or five million metric tons of LNG per year. Preliminary construction cost estimates of CAD3bn will be refined at the conclusion of front-end engineering and design (FEED).
Kitimat LNG received its Provincial Environmental Certificate for the liquefaction terminal in December 2008 and the Federal Environmental Certificate in January 2009.
G Farris, chairman and CEO of Apache, said: “The growing supply of natural gas in the US and Canada is transforming North American energy markets, and this increased resource has significant potential for global impact.
“Development of the Kitimat LNG project has the potential to open new markets in the Asia Pacific region for gas from Apache’s Canadian operations, including the Horn River Basin in northeast British Columbia, where our net estimated resource potential exceeds 10 trillion cubic feet of gas.”
Under the terms of the agreement, Apache will make an initial payment to the current owners of Kitimat LNG with additional consideration due upon achievement of certain commercial and regulatory milestones. Apache will fund the project’s FEED to begin with a final investment decision expected in 2011. First LNG shipments are projected for 2014. Apache will become operator of the project.
Kitimat is designed to be linked to the pipeline system servicing Western Canada’s natural gas producing regions via the proposed Pacific Trail Pipelines, a CAD1.1bn 300-mile project originating at Summit Lake, British Columbia. Through its acquisition of a 51% interest in the Kitimat project, Apache will acquire a 25.5% interest in the pipeline, currently a 50/50 partnership between Galveston LNG and Pacific Northern Gas.
The proposed pipeline has received both the federal and provincial governments’ environmental assessment approvals and has created an arrangement to partner with the First Nations along the pipeline route. Kitimat LNG has signed memorandums of understanding for LNG sales with Gas Natural and Korea Gas Corporation, as well as memorandums with other producers for natural gas supply.