The first of three new natural gas liquids processing plants being built near Dawson Creek through a partnership between Veresen Inc. (TSX:VSN) and Encana (TSX,NYSE:ECA) has started up ahead of schedule and under budget.
The new Tower processing plant, built by Versen Midstream, was started up last week.
The plant’s original capital cost was estimated at $715 million. Encana and Veresen say the plant has come in under budget, but aren’t saying by just how much.
It is one of three being built by Veresen Midstream (a joint venture involving Veresen and Kohlberg Kravis Roberts & Co. L.P) through a fee-for-service agreement, at a total cost of $2.5 billion.
The new plants will primarily process natural gas liquids produced by Encana – the largest producer on the B.C. side of the Montney formation.
Encana’s main focus in B.C. is condensate, although other liquids and gas are produced in the process.
The next plant scheduled for completion – the Sunrise – is slated for startup around mid October, and the Saturn plant is due for completion in the first quarter of 2018.
The $2.5 billion investment underscores the value of Montney play that straddles the Alberta and B.C. border. It is rich in natural gas liquids – condensate (which is used by oil sands producers to dilute bitumen), propane and light oil.
Encana owns assets in four of North America’s most productive shale oil plays – the Permian and Eagle Ford in the U.S. and the Montney and Duvernay in Western Canada.
"The Tower plant startup, delivered ahead of schedule and under budget, is an important milestone in our strategy and five-year plan," Encana CEO Doug Suttles said in a news release.
"Liquids growth in the Montney is a key driver in expanding our corporate margin and delivering quality returns."
The three plants will produce up to 1.5 billion cubic feet per day and will double Encana’s production.
Encana has been investing roughly $200 million a year over the last five years in B.C. to build out its Montney assets.
