Apache to supply Kitimat LNG

By Shaun Polczer
Calgary Herald
August 11, 2009

The prospects for liquiefied natural gas(LNG) exports off the West Coast took another step forward Monday, after Calgary-based Kitmat LNG signed an agreement with Houston-based Apache Corp. to supply its proposed liquifaction facility in northern British Columbia.

Kitimat said Apache has agreed to supply up to 40 per cent, or 200 to 300 million cubic feet (mmcf) per day of the terminal's proposed 700 mmcf capacity. Kitmat president Rosemary Boulton said the deal would allow the company to proceed with engineering and design work to begin initial construction later this year.

"It's very positive," Boulton said in an interview. "It feels like we've got a lot of traction and forward momentum. We now have the minimum volume we need for the terminal to go forward."

Apache is the second producer to express interest to ship gas into the terminal, which is expected to come into service in 2013. In July, Kitimat signed a similar agreement with Texas-based EOG Resources for an unspecified amount of gas supplies.

The company has also been signing up buyers to take the gas to markets in Asia and possibly South America. In June it reached a memorandum of understanding with Korea Gas Corp. to buy about 300 million cubic feet per day and on July 5 added Spain's Gas Natural as a potential buyer for about 200 million cubic feet per day.

Boulton said at least one more supply deal is pending for the balance of the facility's total capacity.

Apache is partners with Calgary-based En-Cana Corp. at Horn River in northeastern B. C., where they jointly hold about 170,000 hectares.

On July 30 Apache said recent wells at Horn River strengthen its optimism for the potential of Horn River to rival big shale plays in the U. S., with new wells coming on as high as 16 million cubic feet per day. Thus far, the two companies have drilled 28 wells and brought 10 horizontal wells on production, and expect to have 32 producing wells by the first quarter of 2010.

Unlike EOG, which is a big player in several U. S. shale plays, including the Barnett near Dallas--and EnCana which has dominant positions in shale deposits in Texas and Louisiana --Horn River is Apache's only North American unconventional gas development.

"It clearly is a big part of Apache's growth strategy," spokesman Bill Mintz said from Houston.

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