Apache Canada Ltd. has agreed to acquire 51 percent of Kitimat LNG Inc.'s planned liquefied natural gas (LNG) export terminal in British Columbia. Apache also reserved 51 percent of capacity in the terminal.

The proposed Kitimat project, located at Bish Cove near the Port of Kitimat about 405 miles (652 kilometers) north of Vancouver, has planned capacity of about 700 MMcf of natural gas per day, or five million metric tons of LNG per year. Preliminary construction cost estimates of $3 billion (Canadian) will be refined at the conclusion of front-end engineering and design (FEED). The project will employ an estimated 1,500 people during construction and 100 on a permanent basis.

Kitimat LNG received its Provincial Environmental Certificate for the liquefaction terminal in December 2008 and the Federal Environmental Certificate in January 2009.

"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."

"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, 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."

Under the terms of the agreement, Apache will make an initial payment to the current owners of Kitimat LNG with additional consideration due upon achievement of certain commercial and regulatory milestones. Apache will fund the project's FEED -- to begin shortly -- with a final investment decision expected in 2011. First LNG shipments are projected for 2014. Apache will become operator of the project.

Kitimat is designed to be linked to the pipeline system servicing Western Canada's natural gas producing regions via the proposed Pacific Trail Pipelines, a $1.1-billion (Canadian), 300-mile (463-kilometer) project originating at Summit Lake, B.C. Through its acquisition of a 51-percent interest in the Kitimat project, Apache will acquire a 25.5-percent interest in the pipeline, currently a 50/50 partnership between Galveston LNG and Pacific Northern Gas Ltd. The proposed pipeline has received both the federal and provincial governments' environmental assessment approvals and has created an innovative arrangement to partner with the First Nations along the pipeline route.

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