Enbridge stops B.C. gas project

Enbridge and its co-owners have stalled commissioning of a gas processing plant in northeastern British Columbia, citing a shortfall in anticipated gas production from the Horn River basin.

Phase 1 of its C$1.15 billion Cabin project was due to start processing 400 million cubic feet per day later this year and a second similar phase was expected to be ready for service in two years.

The company will not issue a revised startup date until market conditions are appropriate, which means that gas produced in Horn River will need the type of processing facilities offered by Cabin.

Enbridge acquired Encana’s share of the project last year and raised its stake to 62 percent of Phase 1 and 80 percent of Phase 2 in December.

Other partners are Horn River producers Imperial Oil, ExxonMobil, Nexen and Apache.

Capacity for both phases has been fully booked under long-term take-or-pay contracts with Horn River producers.

Juan Plessis, an analyst with Canaccord Genuity, said that despite the delay in commercializing Phase 1 Enbridge will still receive their negotiated fees.

Demand for Horn River gas will surge if proposed LNG export projects go ahead, although none is expected on stream before 2015.

Enbridge also announced it will buy existing Encana midstream assets in northwestern Alberta to build gathering and processing systems for Encana’s liquids-rich natural gas.

Leon Zuppan, Enbridge’s president for gas pipelines, said the Peace River Arch region is expected to “grow significantly in the years to come, under the same attractive commercial underpinning and return as our original Cabin investment.”

Enbridge will pay about C$139 million for the existing assets and will work with Encana to assess and build out gathering and processing facilities expected to result in a total Enbridge investment of C$264 million.

Encana said the deal is part of its strategy to switch to liquids-rich gas and focus on preserving capital because of ongoing dry gas market issues.

—Gary Park