Apache takes control of Kitimat LNG

Gary Park

For Petroleum News

U.S. independent Apache has made a decisive move to the forefront of North America’s changing energy markets by taking control of British Columbia’s Kitimat LNG project.

The Canadian unit of Apache announced Jan. 13 it will acquire a 51 percent stake of the proposed export terminal and 51 percent of the facility’s capacity.

That follows a deal last August which would have seen Apache take an equity position in the C$3 billion project that is expected to have capacity of 700 million cubic feet per day if it comes on stream as scheduled in 2014.

The financial terms were not disclosed.

Apache Chairman and Chief Executive Officer Steven Faris said in a statement that the growing gas supply in the U.S. and Canada is “transforming” the continental market.

“This increased resource has significant potential for global impact,” he said.

“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.”

Alfred Sorenson, chief executive officer of Galveston LNG, the current owner of Kitimat LNG, said the “economic fundamentals remain strong for exporting natural gas from Western Canada to international markets where natural gas is in demand, such as Asia.”

“As natural gas supply and reserves continue to increase in North America, Kitimat LNG’s terminal will provide producers in Canada with secure access to key worldwide markets.”

Kitimat would be linked to Western Canada’s fast-emerging shale and tight gas producing regions through the planned Pacific Trail Pipeline, a C$1.1 billion, 300-mile link to the deepwater port at Kitimat on the northern British Columbia coast.

By acquiring a 51 percent interest in the Kitimat project, Apache would take a 25.5 percent stake in the pipeline, which is currently a joint partnership between Galveston LNG and Pacific Northern Gas.

The pipeline has Canadian and British Columbia government environmental approvals and has established an arrangement to partner with First Nations along the pipeline route.

Kitimat also has British Columbia and federal certificates for the liquefaction terminal.

Kitimat had a memorandum of understanding with EOG Resources to supply gas to the project and sales deals with Spain’s Gas Natural and Korea Gas. It is not immediately clear where those agreements stand.