Apache Canada Ltd. and EOG Resources Canada Inc. have awarded engineering, procurement and construction company KBR the front-end engineering and design contract for Kitimat LNG, the natural gas liquefaction and export facility the partners are planning on British Columbia's west coast. Financial terms were not disclosed.

"This is another important milestone for Kitimat LNG, taking us a significant step closer in being able to export LNG [liquefied natural gas] to Asia-Pacific markets as soon as 2015," said Kitimat LNG President Janine McArdle.

The partners said they secured full ownership in the infrastructure needed to transport gas from production areas to the Kitimat facility with the recent announcement of plans to acquire the 50% interest they don't already own in Pacific Trails Pipeline Limited Partnership, which plans to construct a 287-mile, 36-inch diameter underground pipeline to carry gas from Summit Lake, BC, to Kitimat (see Daily GPI, Feb. 8). The deal is intended to support export of gas from the Horn River Basin and other Western Canada plays as LNG to Asian markets.

Pacific Northern Gas Ltd. (PNG) will operate and maintain the planned pipeline under a seven-year agreement with Apache and EOG with provisions for five-year renewals. Apache Canada and EOG Canada also agreed to 20-year transportation service arrangements requiring them to use a portion of PNG's current pipeline capacity.

Kitimat is well under way with engineering and design work, and has the prospect for several Asia-Pacific buyers with whom the project's backers are now in discussions, according to Apache, which holds a 51% interest in the project (see Daily GPI, Feb. 22a). The producers expect to have firm sales commitments in place by the end of this year. Initial LNG shipments are expected to begin in 2015, they said.

Houston-based EOG anticipates committing a percentage of its approximately 9 Tcf net after royalty of natural gas reserve potential in British Columbia for export through the Kitimat terminal (see Daily GPI, Feb. 22b).

EOG envisions the Horn River as being a natural gas play tied to oil prices, with the production being sold through Kitimat as LNG to the Pacific Rim countries and others who traditionally index their LNG prices to oil. Similarly, Nexen Inc. officials recently said they are interested in connecting the Horn River Basin to the LNG trade, possibly through a future export facility at Kitimat.

A hearing on Kitimat LNG's application to Canada's National Energy Board for a 20-year export license is set for June 7.

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