CALGARY, April 2, 2018 /CNW/ – Keyera Corp. (TSX:KEY) (“Keyera”) today announced that it has entered into a 20-year infrastructure development and midstream service agreement (the “Agreement”) with Encana Corporation (“Encana”) to support their condensate focused Pipestone Montney development near Grande Prairie, Alberta. In a joint effort, Keyera and Encana will develop a liquids hub and a natural gas processing and liquids stabilization plant (together, the “Project”). Under the terms of the Agreement, Keyera will own the Project and provide processing services to Encana under a long-term fee-for-service arrangement with a modest revenue guarantee. The Agreement also includes an area dedication that allows Encana to use its existing processing facilities in the area up to a defined limit.
In consultation with Keyera, Encana will be responsible for the design and construction of the Project and will initially operate the facilities. Keyera will be responsible for all commercial development and has the option to assume operatorship of the Project five years after the start up of the natural gas processing and liquids stabilization plant.
The Pipestone Liquids Hub is currently under construction and will include a total of 14,000 barrels per day of condensate processing capacity. Based on the proposed construction schedule, operations and associated cash flows are expected to start up in the fourth quarter of 2018. The liquids hub is estimated at $105 million and as a result, Keyera now expects to invest growth capital of between $900 million and $1 billion in 2018.
The Pipestone Plant will include a total of 200 million cubic feet per day of sour gas processing capacity with acid gas injection capabilities, 24,000 barrels per day of condensate processing capacity and associated water disposal facilities. Based on the Project development schedule, operations of the Pipestone Plant are anticipated to begin in 2021. The preliminary capital estimate for the Pipestone Plant is between $500 million and $600 million, with a significant amount of the investment expected to occur in 2019 and 2020. Keyera now has over $2 billion of approved capital projects that it expects to complete over the next three years and is currently well positioned to fund this program.
The Pipestone Plant will be designed to accommodate a future capacity expansion of up to an additional 200 million cubic feet per day of sour gas processing and associated condensate stabilization. This second phase would allow Keyera to process gas from other producers in the area and support future growth from Encana. Keyera will begin discussions with producers in the area for additional volume commitments that would fill third party capacity available in the first phase and support a future second phase.
“This Project aligns with Keyera’s strategy of building a stronger presence in the liquids-rich Montney development of northwestern Alberta, where strong geology and attractive economic returns are driving producer activity,” said David Smith, Keyera’s President and Chief Executive Officer. “With Pipestone and the continued build out of our Wapiti and Simonette gas plants, approximately half of Keyera’s gathering and processing margin is expected to be focused on liquids-rich Montney and Duvernay developments. We look forward to working with Encana and stakeholders to develop this Project in a socially and financially responsible manner.”
Keyera Corp. (TSX:KEY) operates an integrated Canadian-based midstream business with extensive interconnected assets and depth of expertise in delivering midstream energy solutions. Its predominantly fee-for-service based business consists of natural gas gathering and processing, natural gas liquids processing, transportation, storage, marketing, iso-octane production and sales, and an industry-leading condensate system in the Edmonton/Fort Saskatchewan area of Alberta. Keyera strives to provide high quality, value-added services to its customers across North America and is committed to conducting its business ethically, safely and in an environmentally and financially responsible manner.