SemGroup Corp. said its midstream subsidiary in Western Canada has agreed with NuVista Energy Ltd. to build a 200 MMcf/d sour gas processing plant in the Montney Shale in Alberta, supported by a 15-year take-or-pay arrangement for most of the plant's capacity.

A SemGroup subsidiary, Calgary-based SemCAMS ULC, would begin construction of the Wapiti Gas Plant in the second quarter of 2017. The project is estimated to cost between C$300 million and C$350 million ($226.6-264.4 million), and is expected to be online by the second quarter of 2019.

Tulsa-based SemGroup said the Wapiti Gas Plant was licensed by the Alberta Energy Regulator last August. Besides raw sour gas, the new plant would also have the capacity to produce 20,000 b/d of condensate. The facility would use the subsidiary's existing Wapiti and Simonette pipeline systems, which are connected to its Kaybob South No. 3 (K3) and Kaybob Amalgamated (KA) sour gas plants, to process 350 tons/d of sulfur.

The 15-year agreement with NuVista includes up to 120 MMcf/d of processing. SemGroup said negotiations were underway with other producers in the area to fully subscribe the plant's remaining capacity.

The Wapiti Gas Plant would be a “significant expansion of our commitments for a true win-win with our growth-oriented customer, NuVista Energy," said SemCAMS Vice President David Gosse. "This is an exciting project for SemCAMS, and another significant milestone in our strategic growth plans to meet the midstream needs of producers in the world class Montney and Duvernay plays."

SemGroup said with the new Wapiti Gas Plant and existing pipeline infrastructure, SemCAMS would be able to process 330 MMcf/d of Montney gas production, and capacity could be expanded in the future. The K3 and KA plants have a combined licensed processing capacity of 1.5 Bcf/d of sour gas, as well as 3,000 tons/d of sulfur handling.

According to its website, SemCAMS has more than 600 miles of interconnected gathering systems for sweet gas and sour gas in Alberta, including field dehydration and compression facilities. It operates two sweet gas processing plants in the province, near Fox Creek and Whitecourt, AB.

Last month, SemGroup completed the acquisition of all of the outstanding common units of its former master limited partnership (MLP) Rose Rock Midstream LP not already owned by the company. The all-stock transaction valued at $391 million was announced at the end of May (see Shale DailyJune 1). Like many of its contemporaries at the time, SemGroup spun off some of its crude oil assets into an MLP in 2011 (see Shale Daily, Oct. 25, 2011).