Canadian midstream operator Keyera Corp. has agreed to transport and process the Wapiti Montney condensate-rich natural gas production of NuVista Energy Ltd.

The companies agreed to a 10-year contract with an initial firm capacity of 35 MMcf/d of raw gas production beginning in the second quarter of 2014, and increasing to 65 MMcf/d potentially as early as late 2014. The agreement provides flexible terms through a minimum take-or-pay (TOP) commitment of 75% of the volumes.

NuVista said it will not be contributing any capital toward the arrangement; however, the Keyera processing and transportation fee will include capital and operating fee components. NuVista's area strategy is to reduce operating costs through economies of scale from operated wells and facilities and expects to realize a 25-33% reduction in overall Wapiti Montney operating costs by mid-2014.

"The Keyera agreement will ensure the continued progression of NuVista's Montney development program and result in facilitating the acceleration of production growth, while significantly reducing operating costs over the current cost structure," the company said.

In order to accommodate production from the Wapiti development, Keyera will construct a 90 kilometer 12-inch diameter pipeline from a future NuVista compressor station in the South block of its Wapiti Montney lands to the existing Keyera Simonette gas plant. Keyera will also construct additional plant inlet facilities to accommodate the gas and liquids production from Wapiti.