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Calgary-based independent Encana Corp. has started up the second of the three Montney Shale natural gas processing plants that under development as part of its Cutbank RIdge Partnership with Veresen Midstream, management announced Thursday.
Encana said it successfully started up its Sunrise processing plant on Sept. 27, under budget and ahead of schedule. A week before that, Encana started up its Tower processing plant. The third plant, Saturn, is ahead of schedule and on pace to start up later this year, the exploration and production (E&P) company said.
"The new processing and midstream infrastructure now in place firmly supports our growth plan in the Montney, which is a key driver to expanding our corporate margin and delivering quality returns," CEO Doug Suttles said.
Under the Cutbank Ridge Partnership, Encana is constructing Tower, Sunrise and Saturn for Veresen on a contracted basis. Veresen will fund and own the facilities, with Encana using them to process its Montney production under a fee-for-service agreement.
Encana, which also operates assets in the Duvernay and in the Permian Basin and Eagle Ford Shale in the Gulf Coast, has targeted its condensate-rich Montney acreage as a core component of its five-year plan, with the Tower, Sunrise and Saturn facilities expected to unlock additional growth opportunities in the play.
Earlier this year, the E&P laid out a development strategy for the Montney supported by firm transportation and hedging to limit the impact of unfavorable pricing at AECO. This includes a commitment to move 316 MMcf/d to Ontario’s Dawn Hub as part of TransCanada Corp.'s open season to entice Western Canadian producers to transport gas eastward on the TransCanada Mainline at a discount.
Over the next few years, production out of Western Canada will have to compete with growing supply from the Appalachian Basin, the Haynesville Shale and from associated gas out of the Gulf and Midcontinent, creating the potential for capacity constraints and negative basis differentials as most incremental demand growth comes out of the Gulf Coast, according to a recent analysis from RBN Energy LLC.