24 December 2012

Apache Canada, Chevron Canada Announce JV for Kitimat LNG Project in British Colombia

- Chevron will market LNG, operate plant and pipeline assets
- Apache will operate the upstream assets 
- Encana and EOG Resources will sell their interest 

Houston - 24 December 2012 (PRNewswire) - Apache Corporation today announced that its subsidiary Apache Canada Ltd. has signed a broad agreement with Chevron Canada Limited to build and operate the Kitimat LNG project and develop world-class shale gas resources at the Liard and Horn River basins in British Columbia, Canada. 

Chevron Canada, a subsidiary of Chevron Corp, and Apache Canada each will become a 50 percent owner of the Kitimat LNG plant, the Pacific Trail Pipeline and 644,000 gross undeveloped acres in the Horn River and Liard basins. ChevronCanada will operate the LNG plant, which will be located on the northern British Columbia coast, and the pipeline; Apache Canada will operate the upstream assets. 

"This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with longstanding relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America," said G. Steven Farris, Apache's chairman and chief executive officer. 

Encana and EOG Resources — currently 30 percent non-operating partners in Kitimat LNG and Pacific Trail Pipeline — will sell their interests to Chevron and exit the venture. As part of the transaction with Chevron, Apache will increase its ownership of the plant and pipeline to 50 percent from 40 percent. 

Apache, an experienced producer of unconventional oil and gas resources, will operate the new joint venture's development of 220,000 gross acres in the Horn River Basin and 424,000 gross acres in the Liard Basin. Chevron will purchase a 50 percent interest in undeveloped upstream assets in the Liard Basin from Apache and other Horn River assets from Encana, EOG and Apache. 

As part of this transaction, Apache will sell to Chevron a 50 percent interest in its 100 percent-owned undeveloped Liard and Horn River acreage for $550 million. Apache will pay Chevron to equalize interests in other Horn River acreage owned by Apache, Encana and EOG. Apache also will pay Chevron to increase Apache's ownership of the LNG plant and pipeline projects to 50 percent. Apache's net proceeds are expected to be approximately $400 million. The transaction, which is subject to certain government approvals, is expected to close in the first quarter of 2013. 

As is customary in LNG projects, Apache and Chevron will explore sales of equity interests in the plant and upstream assets to foundation customers. 

Kitimat LNG, at Bish Cove on the northern British Columbia coast approximately 400 miles (650 km) north of Vancouver, is currently completing front-end engineering and design, and early site work is under way. Current plans call for two liquefaction trains, each with expected capacity of 5 million tons of LNG per annum (about 750 million cubic feet of gas per day). Kitimat has received all significant environmental approvals and a 20-year export license from the Canadian federal government. 

The 290-mile (463-km) Pacific Trail Pipeline will provide a direct connection between the Spectra Energy Transmission pipeline system and the Kitimat LNG terminal. The project has strong support from many of the First Nations along the route. 

RBC Capital Markets was advisor to Apache, EOG and Encana in the sale preparation of portions of their Horn River Basinholdings. 

Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt, the United Kingdom North Sea, Australia and Argentina

Source: Apache Corporation