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Kitimat aims for 2012 decision Encana says 6 potential Asian buyers for LNG; expects contracts to support corporate sanctioning; 2 trains would total 1.4 bcf day Gary Park For Petroleum News
The Kitimat LNG partnership is making enough headway in its efforts to line up Asian buyers that a final investment decision is still expected in early 2012, according to an official with Encana, which has a 30 percent stake in the project.
Dave Thorn, Encana’s vice president of Canadian marketing, said the discussions with prospective customers are based on Kitimat’s proposed two-train facility of 700 million cubic feet per day each.
“There’s been very strong interest to date,” with six potential LNG buyers in the running, he said.
Apache, with a 40 percent stake, is the operator and EOG Resources claims the remaining 30 percent.
Thorn said the partners expect to have “contracts for a significant portion of Kitimat capacity in place to support the final investment decision.”
He said a front-end engineering and design study is close to completion and, with final corporate sanctioning, would allow construction to ramp up in 2012, setting the stage for initial exports in 2015.
Canadian environmental assessment agency regulators are expected to deliver a ruling later in October.
Oil-linked pricing Thorn said one of the benefits for Encana is the chance to “convert a portion of our natural gas pricing to crude oil-linked pricing,” with the feedstock sourced from the company’s gas resource plays in British Columbia and Alberta.
The proponents, all leading gas producers in British Columbia, say Kitimat would allow them to take advantage of LNG prices that are based on higher price realizations from crude oil and assumptions that LNG demand in China, India and probably Japan will be very strong through 2020, with other Asian countries expected to join the demand line-up.
Thorn said the partners also anticipate completing work on a C$1 billion Pacific Trails pipeline, covering 290 miles and offering capacity of 1 billion cubic feet per day, linking the planned Kitimat LNG terminal to Spectra Energy’s gas processing complex in British Columbia.
Encana lowering supply costs Mike Graham, president of Encana’s Canadian division, said Encana is continuing to make gains in lowering supply costs at its northeastern British Columbia operations in Horn River, which is seen as a major supply source for Kitimat.
He said a 50:50 partnership of Encana and Apache is producing about 300 million cubic feet per day gross in Horn River, utilizing multi-well pads with as many as 16 horizontal wells each and up to 28 completion stages in each well.
Graham said Encana’s objective for its resource play hubs is $3 per thousand cubic feet equivalent over the next three to five years.
Encana holds about 278,000 net acres in the Horn River and averaged output of 85 million cubic feet per day in the second quarter, targeting 95 million cubic feet for 2011.
Graham said the company expects to hold inflation to 4 percent-6 percent this year, compared with its forecast 7 percent to 9 percent for the Canadian energy sector.
He said Encana plans to raise the liquids-rich natural gas output from its Deep basin operations in Alberta and British Columbia to 30,000 barrels per day from its current 10,000 bpd in the next two years.
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