Pacific Northern Gas has agreed to sell its 50 per cent stake in a planned $1.2-billion natural gas pipeline in Northern B.C. for $50 million to a pair of American-based companies.
Apache Canada Ltd. and EOG Resources Canada Inc., whose parent companies are headquartered in Houston, Tex., asked Pacific Northern Gas to sell its stake so they could better manage the co-ordination and financing of the pipeline project with a planned $3-billion liquefied natural gas export facility at Kitimat.
The plan is to export natural gas from northeastern B.C. to Asia.
Apache and EOG Resources already own the other half of the pipeline. When the deal is completed, Apache will own 51 per cent of the pipeline, and EOG will own 49 per cent.
Vancouver-based Pacific Northern Gas, which already operates a natural gas pipeline in Northern B.C, agreed to the deal after obtaining the cash and other benefits.
"We believe the transaction delivers full and fair value for our stake in [Pacific Trails Pipeline] and provides significant benefits for all Pacific Northern Gas stakeholders," said Pacific Northern Gas president and CEO Roy Dyce.
Apache and EOG Resources say the purchase of the 50 per cent pipeline stake from Pacific Northern Gas will help move the entire project forward. The export facility in Kitimat is forecast to begin operating in 2015.
"This purchase ensures continuity for this project and is a very positive move for the advancement of the facility," said L.W. Helms Jr., vice-president and general manager of EOG Canada.
Apache Canada president Tim Wall said they look forward to maintaining existing relationships with all the parties involved in the project. "We are committed to moving this project ahead and keeping the development process on schedule," said Wall.
First Nations also welcomed the deal.
"This should be a sign of encouragement," said Carrier Sekani Tribal Council chief David Luggi, whose group supports the pipeline.
An agreement signed in 2009, gives 15 First Nations in Northern B.C. the potential to take a 30 per cent ownership stake in the pipeline.
The sale to Apache and EOG Resources has two parts.
A first payment of $30 million will be paid once the deal closes. Another $20 million will be paid when Apache and EOG Resources decides to proceed with the construction of the Kitimat liquefied natural gas plant.
As part of the deal, Pacific Northern Gas will operate the pipeline for at least seven years, with an opportunity to renew.
Apache and EOG Resources also agreed to use about 40 per cent of the capacity on Pacific Northern Gas's existing pipeline during a 20-year period, but only if the capacity is not claimed under a separate agreement with a different company.
The 463-kilometre pipeline, which would connect with existing pipelines at Summit Lake, is meant to deliver growing natural gas reserves in northeastern B.C. to Kitimat for export to Asian markets.
Both Apache and EOG Resources hold natural gas rights in the Horn and Montney basins in northeastern B.C.
The natural gas piped from northeastern B.C. would be turned into a liquid at the plant in Kitimat by cooling it to -162 C. The liquefied gas would be loaded onto special ships for transport.
The planned pipeline and the liquefied natural gas plant in Kitimat already have federal and provincial regulatory approval.
