By Dan Healing, Calgary Herald, May 19, 2010
U.S. firms unite to build B.C. export terminal
Canada's first liquefied natural gas export terminal will be owned by two major American energy companies after Houstonbased EOG Resources Inc. announced it is buying the parent company of Kitimat LNG Inc.
Through its Canadian subsidiary, EOG said it will buy Galveston LNG of Calgary, acquiring 49 per cent of the West Coast terminal to be located 650 kilometres north of Vancouver.
In January, Apache Corp., also headquartered in Houston, announced it would buy a 51 per cent stake in the project from Galveston and take over as operator of the proposed $3-billion facility.
No purchase price was given for either deal.
Both Apache and EOG are active explorers and developers in B.C.'s promising Horn River natural gas field in the northeast corner of the province.
Their purchase indicates a desire to find better markets than the continental United States, which is awash in cheap gas from shale gas plays, said analyst Ralph Glass of AJM Petroleum Consultants in Calgary.
"I would argue that both Apache and EOG are seeing there has to be an alternative market for that (B. C.) gas rather than the Lower 48 (states)," he said, adding that it's an investment for the longer term that ignores current LNG market conditions.
"This is not a one-or two-year plan. It's a four-or fiveyear plan. The growth market is definitely going to be Asia."
Mark Papa, chairman and chief executive of EOG, said in a news release that the terminal "has the potential to attract new markets for western Canadian natural gas supply not only in the Asia-Pacific region but globally."
The much-delayed project was originally envisioned as an LNG import terminal six years ago, but the flow was reversed in view of B.C.'s gas potential and growing markets in the Asia-Pacific region.
"It's been a tremendous project, really a project of a lifetime for me," said Kitimat president and chief executive Rosemary Boulton on Tuesday.
"I'm just pleased with the fact it's going to go to two companies who will be able to drive it all the way home."
EOG will also gain a 24.5 per cent interest in Pacific Trail Pipelines, a partnership between Galveston, Apache and Pacific Northern Gas Ltd. to build a $1-billion, 460-kilometre link to Western Canada's natural gas producing regions.
EOG has an estimated nine trillion cubic feet of natural gas reserves (850 billion cubic feet proved) on 157,500 net hectares in the Horn River play, said spokeswoman Elizabeth Ivers.
Apache is partnered with gas producer Encana Corp. of Calgary to explore for gas in the same area.
The planned capacity of the LNG terminal, to open by 2014, is about 700 million cubic feet of natural gas per day or five million tonnes of LNG per year.
Last June, Korea Gas Corp., the world's largest LNG importer, signed a deal with Kitimat LNG to move 1.8 million tonnes per year, or 40 per cent of the proposed export terminal's capacity.
dhealing@theherald. canwest.com
