Apache Canada Ltd., a subsidiary of U.S. energy firm Apache Corp. (APA), has agreed to acquire a controlling stake in a proposed C$3 billion ($2.9 billion) liquefied natural gas (LNG) export terminal in northwestern British Columbia. The company announced the purchase of a 51% ownership interest in Canada-based Kitimat LNG Inc.’s planned venture. Apache, which is set to become the project’s operator, has also reserved 51% of the capacity in the terminal as part of the deal. 

The financial terms of the transaction were not disclosed apart from the fact that Apache will make an initial payment to the current owners of Kitimat LNG with additional consideration due upon achievement of certain performance criteria. However, Apache did state that it will fund the project’s front-end engineering and design costs through the final investment decision, which is expected in 2011. 

The proposed terminal, to come up at Bish Cove near the Port of Kitimat about 405 miles north of Vancouver, has planned capacity to ship out about 700 million cubic feet of natural gas per day, or 5 million metric tons of LNG per year. First shipment from the project is expected in 2014. 

The Kitimat venture is designed to be linked to the pipeline system servicing Western Canada’s natural gas producing regions via the proposed $1.1-billion Pacific Trail Pipelines project, a 300-mile project originating at Summit Lake in British Columbia. Through its majority ownership of the Kitimat terminal, Apache will also acquire a 25.5% interest in the pipeline, currently a 50/50 partnership between Kitimat LNG parent company Galveston LNG Inc. and Pacific Northern Gas Ltd. 

Apache’s acquisition gives the project, already with certain government approvals, a considerable boost and gives producers a chance to sell their natural gas in the Asian markets. 

Houston-based Apache is a major player in northeastern British Columbia’s Horn River shale natural gas play, where its net estimated resource potential is more than 10 trillion cubic feet of gas. The company holds about 210,000 net acres in the region. Development of the Kitimat project has the potential to open up new markets in the Asia-Pacific region for exporting gas from Apache’s Canadian operations, including the Horn River Basin.
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