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Apache Buys Controlling Stake in Kitimat LNG Terminal

Apache Corp.'s Canadian subsidiary, which had been in talks to supply natural gas to Kitimat LNG Inc.'s proposed liquefied natural gas (LNG) export terminal in Kitimat, BC, last Wednesday upped the stakes by agreeing to purchase a controlling stake in the facility for an undisclosed amount.

Apache, which is one of the biggest natural gas producers in the emerging Horn River Shale of British Columbia, agreed to buy a 51% stake in the terminal and a 25.5% interest in Pacific Trail Pipelines LLC (PTP) from Galveston LNG Inc., the parent company of Kitimat LNG.

PTP is developing the C$1.2 billion Kitimat to Summit Lake Pipeline Looping Project (KSL) to transport natural gas supply to the LNG export terminal (see NGI, April 13, 2009; March 23, 2009). Galveston LNG will retain a 49% interest in the terminal and a 24.5% interest in PTP. Pacific Northern Gas Ltd. (PNG) holds the remaining half-stake in PTP.

PNG CEO Roy Dyce welcomed Apache's sponsorship for the LNG export project, which could be constructed beginning in 2012 with completion in 2014, if all approvals are obtained.

"Our focus will now be to complete agreements with Apache and other users of the KSL project prior to filing an application for a Certificate of Public Convenience and Necessity with the British Columbia Utilities Commission in 2010," Dyce said. The project has obtained both federal and provincial environmental assessment approvals, as well as a partnership arrangement with First Nations along the pipeline route.

Houston-based Apache last August agreed in a memorandum of understanding (MOU) with Kitimat LNG to negotiate a supply agreement for 200-300 MMcf/d for the terminal, which has a planned capacity of 700 MMcf/d (see NGI, Aug. 17, 2009). The Canadian arm of Houston's EOG Resources Inc. last year also signed an MOU with Kitimat LNG on supply, and other MOUs have been negotiated with Korea Gas Corp. and Gas Natural to purchase LNG produced at the terminal (see NGI, July 20, 2009).

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