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Tight-gas deal between Encana and PetroChina collapses

Joint venture worth C$5.4 billion ($5.5 billion) to develop Encana’s Cutbank Ridge tight-gas assets in British Columbia (BC) and Alberta falls apart

TALKS over a tight-gas joint venture between Encana and PetroChina have collapsed. The C$5.4 billion ($5.5 billion) deal was a proposed 50:50 joint venture to develop Encana’s Cutbank Ridge tight-gas assets in British Columbia (BC) and Alberta, Canada.

The Canadian firm said it had failed to reach “substantial alignment” with PetroChina on terms for the joint-operating agreement. Encana is now seeking other investors to jointly develop the play, which it claims has “tremendous value”. The company, Canada’s largest gas producer, will also consider offering a deal for its pipeline and processing assets in the area.

The Cutbank Ridge assets span over 1 million acres across the Montney, Cadomin and Doig geological formations. The company produced over 400 million cubic feet a day (cf/d) of gas from the formation last year, up from 110 million cf/d in 2005.

“The best way for us to advance our plans to unlock value from our Cutbank Ridge assets is to offer a variety of joint-venture opportunities for portions of the undeveloped resources”, said chief executive Randy Eresman.

Encana is also looking for joint-venture partners for its Horn River and Greater Sierra shale-gas assets in BC and says joint-venture discussions are well under way. It now expects to receive revenue from asset sales of between $1 billion and $2 billion, up from a previous forecast of $500 million to $1 billion.

The most likely means of monetising the resources is through exports to Asia-Pacific markets. Encana holds a 30% stake in the Kitimat LNG (liquefied natural gas) export project, planned on the BC coast.

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