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AltaGas Building Montney Shale Gathering, Processing

November 9, 2010
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Midstream operator AltaGas Ltd., based in Calgary, said Thursday it plans to build a 120 MMcf/d gas processing facility and associated gathering system in the Gordondale area of the Montney Shale in British Columbia.

Encana Corp., one of the largest leaseholders in the gas play, has signed a long-term gathering and processing agreement, AltaGas said.

The Gordondale midstream system, which would cost about C$235 million, could be in service by late 2012 pending regulatory approvals, said AltaGas. The company said processing using existing infrastructure in the area could begin by mid-2011.

"The Gordondale gas processing facility is an exceptional gas infrastructure project located in an area of strong natural gas supply growth that will provide long-term, stable cash flows," said AltaGas CEO David Cornhill.

Encana's Mike Graham, president of the company's Canadian division, said the "continued strength of natural gas liquids prices offers Encana opportunities to capture additional value and enhance project returns by stripping the propane, butane and ethane from the extensive liquids-rich production in our deep basin resource plays."

Encana has said the Montney Shale, in which the company is the largest acreage holder with 720,000 net acres, holds enormous development potential and is one of the focuses of the company going forward.

This past summer Encana CEO Randy Eresman said one of the reasons the Montney play is so compelling is that there are no land retention issues there, as in the United States, which allows the producer to hold the leases longer without drilling. "You move right into optimization and can see how the cost structures might ultimately play out," Eresman said in July (see Daily GPI, July 9).

While noting in its 3Q2010 earnings call late last month that Encana is scaling back a bit due to sustained low gas prices, Eresman said the company is still keen on developing its previously announced "gas factory" approach in some regions (see Shale Daily, Oct. 21).

The scheme enables Encana to drill eight "and potentially more" horizontal wells, each containing multiple hydraulic fractures, from a single pad location, which Encana says lowers the environmental impact and optimizes production.

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