Natural gas giant Encana (TSX:ECA) has signed a deal to take a 30% stake in the proposed Kitimat liquefied natural gas (LNG) export terminal.
The Calgary-based company announced the deal on Friday, following a series of announcements about the $3 billion project over the last several weeks.
“New and plentiful natural gas supplies and reserves have created a remarkable opportunity to expand our well-developed North American energy trade to other continents,” commented Encana president and CEO Randy Eresman.
“With Encana’s investment in this planned international trade facility, we are helping lead a continental push to deliver exports of abundance natural gas, for the first time from Canada, to overseas markets.”
The financial terms of the deal were not disclosed, but it would see current Kitimat LNG partners EOG Resources (NYSE:EOG) and Apache (NYSE:APA) divvy up their ownership of the project to make way for Encana.
Apache will retain a 40% stake in the project, while Encana and EOG will each own 30% of the project.
The deal comes two weeks after Apache and EOG awarded the export terminal’s front-end engineering and design contract to KBR, a global engineering firm (see “KBR awarded Kitimat LNG design contract” – BIV Business Today, March 4.)
In February, the LNG partners secured the supply line for the terminal when they bought the remaining 50% of the Pacific Trails Pipeline Partnership for $50 million.
The 463-kilometre pipeline will pump gas to the terminal from Spectra Energy’s (NYSE:SE) transmission system at Summit Lake.
Although the Kitimat export terminal has been on the books in one form or another for years, proponents say the project would give Canadian producers a key outlet to gas-hungry markets in Asia.
The facility would be supplied with gas from massive shale plays in northeast B.C. and Alberta, notably the Horn River Basin and Montney geological formation.
Over the last year, Encana has netted significant Asian investment in its B.C. gas assets.
Last March, Korea Gas Corp. signed a deal to spend $1.1 billion over the next five years developing natural gas projects with Encana in northeast B.C.
Then, last month, the Calgary company inked a $5.5 billion agreement with PetroChina for 50% of the Calgary company’s Cutbank Ridge assets in B.C. and Alberta.
The Kitimat LNG partners expect design and engineering on the project to be complete later this year, at which point the companies will determine whether to move ahead with the project.
At press time, Encana’s shares were up $0.75 to $33.83.