AltaGas continues to execute Northeast B.C. Gas strategy in liquids rich Montney region, strengthening its positioning and value proposition within the region and connecting producers with additional options for energy exports
CALGARY, Sept. 26, 2018 /CNW/ – AltaGas Ltd. (“AltaGas”) (TSX: ALA) announced today that it has entered into a definitive agreement with Black Swan Energy Ltd. (“Black Swan”) to acquire 50% ownership in certain existing and future natural gas processing plants of Black Swan (the “Aitken Creek Processing Facilities”). Upon the completion of the acquisition, AltaGas and Black Swan will enter into long term processing, transportation and marketing agreements that also include new AltaGas Liquids handling infrastructure. The total capital investment by AltaGas for 50% ownership in the Aitken Creek Processing Facilities and new AltaGas infrastructure is anticipated at approximately $230 million.
The 50/50 infrastructure joint-venture, combined with existing and new AltaGas owned and operated liquids handling infrastructure, will further strengthen AltaGas’ Northeast B.C. value proposition and energy export strategy that includes gas processing, liquids handling, field fractionation, and propane export via AltaGas’ Ridley Island Propane Export Terminal (“RIPET”).
“This joint venture with Black Swan further strengthens our position and capture area in one of the most prolific natural gas basins in North America and showcases our competitive position in gas processing and export,” said David Cornhill, Chairman and interim co-Chief Executive Officer of AltaGas. “It expands our liquids handling capabilities in Northeast B.C. and reflects the strong demand we are seeing for our integrated gas strategy and propane export solution. The combined commitments from Black Swan and the recently announced Kelt Exploration Ltd. arrangement triggers an expansion of our North Pine C3+ fractionation capacity from the current 10,000 bbl/d to the permitted and approved 20,000 bbl/d. With this agreement and other initiatives AltaGas is pursuing, total propane supply for RIPET is expected to achieve the initial 40,000 bbl/d target.
“Over the next few years our gas business will continue to be a large driver of growth and an area of significant investment,” continued Mr. Cornhill. “We continue to see strong interest in our integrated gas processing and energy export solution and look forward to partnering with other Northeast B.C. producers in the liquids rich Montney region,” concluded Mr. Cornhill.
The long term processing agreement for use by Black Swan of AltaGas’ processing capacity at the Aitken Creek Processing Facilities will be underpinned by a reserve dedication and area of mutual interest encompassing approximately 30% of the Black Swan Montney lands as well as a priority of fill arrangement for AltaGas capacity ownership in the facilities. Black Swan will continue to operate the North Aitken Creek Processing Facilities.
The transportation and marketing arrangements will provide AltaGas with long-term natural gas liquids (“NGL”) dedication to AltaGas’ liquids handling infrastructure and North Pine field fractionation facility (“North Pine”), as well as corresponding propane marketing arrangements. The initial term of the commercial arrangements is 15 years and will provide both parties with an option to extend through additional natural gas processing investments.
The transaction is anticipated to close in early October 2018, subject to satisfaction of customary closing conditions.
Raw gas processing
Under the terms of the commercial arrangements AltaGas will acquire 50% ownership in the existing 110 MMcf/d North Aitken Creek Gas Plant and in Black Swan’s 100 MMcf/d Aitken Creek Gas Plant which is currently under construction. AltaGas will have the option to participate in two additional plant phases including the potential for enhanced liquids recoveries which could more than double the NGL output of the Aitken Creek Processing Facilities.
The investment in the Aitken Creek Processing Facilities includes $136 million in 2018 and an estimated $50 million in Q4/2019. The Aitken Creek Processing Facilities will have an estimated 210 MMcf/d (gross) operational capacity with the potential for future expansions to increase processing capacity up to 360 MMcf/d (gross).
Liquids handling and field fractionation
Black Swan will enter into an arrangement that includes existing and new AltaGas owned and operated infrastructure. The existing infrastructure that will be utilized by Black Swan includes AltaGas’ liquids pipelines from Townsend to North Pine and fractionation and terminalling at North Pine. The new infrastructure will include liquids pipelines from North Aitken Creek to Townsend and liquids handling at Townsend that will require a capital investment of $40 million in 2019.
Black Swan will also enter into marketing arrangements with AltaGas pursuant to which more than 50% of Black Swan’s propane produced at North Pine will be exported through RIPET and will receive premium Far East Index pricing under a long-term arrangement. The marketing arrangements also include optionality for Black Swan to increase the term and/or volume of its RIPET commitment throughout the term of the upstream processing arrangements.
AltaGas is an energy infrastructure company with a focus on natural gas, power and regulated utilities. AltaGas creates value by growing and optimizing its energy infrastructure, including a focus on clean energy sources. For more information visit: www.altagas.ca.