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U.S. firm buys stake in Kitimat gas project

U.S. oil and gas company Apache Corp. announced Wednesday it has signed an agreement to buy a 51-per cent stake in Kitimat LNG's proposed $3-billion liquified natural gas terminal in northern B.C.

U.S. oil and gas company Apache Corp. announced Wednesday it has signed an agreement to buy a 51-per cent stake in Kitimat LNG's proposed $3-billion liquified natural gas terminal in northern B.C.

The terminal, located at Kitimat, is meant to export natural gas from north eastern B.C. to markets such as Asia.

Apache, which has natural gas resources in northeastern B.C., has reserved 51 per cent of capacity in the terminal.

Transport of the natural gas to Kitimat requires another major project to be completed, a $1.1-billion pipeline connecting Kitimat to Summit Lake, just north of Prince George.

"The growing supply of natural gas in the United States and Canada is transforming North American energy markets, and this increased resource has significant potential for global impact," said G. Steven Farris, Apache's chairman and chief executive officer. "Development of the Kitimat LNG project has the potential to open new markets in the Asia-Pacific region for gas from Apache's Canadian operations, including the Horn River Basin in northeast British Columbia, where our net estimated resource potential exceeds 10 trillion cubic feet of gas."

Under the agreement, Apache will make an initial payment to Kitimat LNG. Apache will fund the project's front-end engineering and design with a final investment decision expected in 2011. The first LNG shipments are expected in 2014.

Apache will also acquire a 25.5 per cent interest in the proposed Pacific Trails Pipeline, which will follow the existing right of way of the Pacific Northern Gas pipeline between Summit Lake and Endako, just west of Fraser Lake. From there, the pipeline will take a direct route to Kitimat.

The Kitimat LNG project, which already has provincial and federal environmental approval, is estimated to need 1,500 workers during construction and 100 permanently.

The pipeline project, which also has government environmental approval, would create jobs during construction, but no additional permanent jobs as partner-Pacific Northern Gas already has employees in northern B.C. to oversee the pipeline.

Last year, Kitimat LNG won the backing of its first natural gas producer, Houston-based EOG Resources, which is also a big player in northeastern B.C.

Companies such as Korea Gas Corp. and Spain's Gas Natural have already agreed to buy the LNG that will be produced from the Kitimat plant.

Kitimat LNG was originally conceived as an import terminal, but, recognizing a fundamental shift in the North American marketplace, decided late last year to reverse it.

"The economic fundamentals remain strong for exporting natural gas from Western Canada to international markets where natural gas is in demand, such as Asia," said Alfred Sorenson, CEO of Galveston LNG Inc., parent company of Kitimat LNG Inc. "As natural gas supply and reserves continue to increase in North America, Kitimat LNG's terminal will provide producers in Canada with secure access to key worldwide markets."

Pacific Northern Gas officials - a partner with Kitimat LNG in the pipeline - have said they will have some time to build the pipeline because the liquefied natural gas plant will take up to three-and-a-half years to complete.

The natural gas pipeline project has a unique investment agreement with many First Nations along the route that could give the bands an ownership stake in the project.

With Canadian Press.

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