The Canadian arm of Houston’s EOG Resources Inc. last week agreed to buy out Galveston LNG Inc., whose subsidiary Kitimat LNG Inc. owns 49% of the proposed liquefied natural gas (LNG) export terminal at Bish Cove, BC. Financial details were not disclosed.

EOG is joining the Kitimat project with Apache Corp.’s Canadian subsidiary, which in January bought the majority interest (51%) of the planned Kitimat project and is to be the operator (see NGI, Jan. 18). Apache at the time also agreed to buy a 25.5% interest in Pacific Trail Pipelines LLC (PTP) from Galveston LNG.

EOG and Apache are two of the leading gas producers in the emerging Horn River Basin in British Columbia.

“By combining our experience and resources, we are confident we can move this project to completion,” EOG CEO Mark G. Papa said of the Apache alliance. EOG plans to “build on the relationship with the Haisla First Nation and being a part of Kitimat and surrounding communities.”

Galveston LNG is a privately owned Canadian energy development company that is capitalized with private and institutional investors. The Kitimat LNG proposal was its largest project to date.

Papa gave a nod to Galveston LNG’s Alfred Sorensen and his employees “for taking a great idea and advancing it to the point where it now has the potential to attract new markets for Western Canadian natural gas supply not only in the Asia-Pacific region but globally.”

EOG is not new to the Kitimat LNG project. Last year EOG was the first to sign a memorandum of understanding (MOU) with Kitimat LNG to supply natural gas to the proposed LNG terminal (see NGI, July 20, 2009). Kitimat LNG also had MOUs in place with Apache, Korea Gas Corp. and Gas Natural (see NGI, July 13, 2009).

Planned capacity of the proposed Kitimat LNG terminal is about 700 MMcf/d, or 5 million metric tons/year. Preliminary construction costs, currently estimated to be around C$3 billion, are to be revised once the front-end engineering and design is completed.

Under the terms of the agreement, EOG’s offer to purchase the shares of Galveston LNG is conditioned upon the achievement of certain commercial and regulatory milestones.

The proposed terminal was being developed by privately held Kitimat LNG Inc., based in Calgary. Once EOG completes its acquisition of Galveston LNG shares, EOG and Apache propose to construct, own and operate the terminal near the Port of Kitimat, BC, where they would export via ship LNG supplies to global markets.

The Kitimat LNG terminal is designed to link to the pipeline transmission system serving Western Canada’s natural gas producing regions via the proposed Pacific Trail Pipelines (PTP), a C$1 billion (Canadian), 300-mile project originating at Summit Lake, BC.

Through its acquisition of Galveston LNG, EOG would acquire a 24.5% interest in PTP, now a partnership of Galveston LNG, Apache and Pacific Northern Gas Ltd. The proposed pipeline has received environmental assessment approvals from both the federal and provincial governments.

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