Encana, China National, target JV in BC

Encana Corp., targeting annual joint-venture investments of $1 billion to $2 billion, signed a memorandum of understanding with China National Petroleum Corp. June 24 which could lead to one such investment.

The June 24 MOU outlines a framework for negotiation of a JV investment in the development of portions of Encana’s British Columbia natural gas plays at Horn River, the Jean Marie formation at Greater Sierra and the Montney formation at Cutbank Ridge.

Encana President and Chief Executive Officer Randy Eresman said the company wants to double production per share over five years.

“Beyond our internally funded capital investments, we have an extensive joint-venture program that helps accelerate value recognition across our North American resource portfolio,” he said.

In the past three years, the company said, Encana has attracted more than US$4 billion in JV capital through multiple agreements, with $900 million of that to be invested in 2010, approaching the company’s target of annual JV investments of $1 billion to $2 billion.

“A joint venture with CNPC could contribute significantly towards achieving that investment target,” the company said.

Encana cut a deal for investment in its British Columbia acreage in late February with Kogas Canada Ltd., a subsidiary of Korea Gas Corp. That three-year farm-in agreement called for Kogas to invest some C$565 million to earn a 50 percent interest in some 154,000 net acres in the Horn River shale (25,000 acres) and the Montney formation (129,000) acres.

Eresman said benefits of the potential joint-venture agreement with CNPC would include lower costs, reduced risks, increased capital efficiencies, improved project returns, optimization of production techniques and tapping of “natural gas opportunities that would otherwise remain dormant for some time.”

—Kristen Nelson