Keyera will provide Encana with condensate and natural gas processing services under fee-for-service arrangement
Encana Corporation has reached an agreement with Keyera Partnership, under which Keyera will acquire and fund the remaining development of Encana’s Pipestone Liquids Hub and Encana’s planned Pipestone Processing Facility, according to a press release.
This agreement provides Encana with an additional 33,000 barrels per day (bbls/d) of net raw condensate processing capacity and 170 million cubic feet per day (MMcf/d) of net inlet natural gas processing capacity. Keyera will provide Encana with processing services under a competitive fee-for-service arrangement.
“We are pleased to expand our relationship with Keyera and to have completed another highly innovative midstream agreement that significantly reduces our financial obligations compared to a traditional take-or-pay structure,” said Renee Zemljak, Encana’s executive VP, midstream, marketing & fundamentals.
“This agreement strongly supports our condensate-focused growth plan in the Montney, advances our five-year plan and demonstrates our commitment to capital discipline and efficiency.”
Under the agreement, Keyera will acquire and fund the remaining development of Encana’s Pipestone Liquids Hub, currently estimated at a total of approximately $105 million.
The Pipestone Liquids Hub is expected to start up in the fourth quarter of 2018, providing Encana with an additional 14,000 b/d of net raw condensate processing capacity, which supports the company’s plan to double its Montney liquids production from the fourth quarter of 2017 to the fourth quarter of 2018.
Keyera will also own and fund Encana’s planned Pipestone Processing Facility, which will include associated acid gas disposal and water handling infrastructure and be located alongside the Pipestone Liquids Hub.
Designed to accommodate future capacity expansion, the initial facility will provide Encana with 19,000 b/d of net raw condensate processing capacity plus 170 MMcf/d of net inlet natural gas processing capacity.
The Pipestone Processing Facility is expected to start up in 2021.
Keyera will provide Encana with condensate and natural gas processing services under a competitive fee-for-service arrangement. This increases Encana’s flexibility and significantly reduces its financial obligations compared to a traditional take-or-pay agreement. With a land dedication structure which is subject to existing processing facilities that Encana owns in the area, Encana’s financial obligation is a revenue guarantee on a fraction of its initial capacity rights.
Encana and Keyera will jointly develop the facilities, with Encana managing the design, construction and initial operation. Keyera will oversee all commercial and ownership activities for both facilities.
The sales proceeds received by Encana under the transaction are approximately $39 million, subject to post-closing adjustments. The effective date of the agreement is March 1, 2018.
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