Enbridge becomes majority owner and will fund expansion of Cabin Gas Plant in British Columbia

Enbridge Inc. has agreed to become a majority owner of the Cabin Gas Plant in British Columbia for $250 million and help finance its development.

The Calgary-based oil pipeline and natural gas distributor said Friday it will pick up a 57.6 per cent stake from Encana Corp. and other co-owners of the property.

The Cabin Gas Plant is located near Fort Nelson, in the Horn River Basin of northeastern B.C. The plant is expected to process 800 million cubic feet of natural gas per day when it goes into service.

Enbridge said it will pay $250 million for the stake and also finance the plant's expansion _ raising its investment in the project to about $900 million.

"Our investment in the Cabin Gas Plant development is a substantial initial step in the execution of our strategy to establish a strong position in the Canadian midstream business focused on growing unconventional gas production in B.C. and Alberta,'' said Al Monaco, president of gas pipelines, green energy and international operations for Enbridge.

“This strategy involves leveraging our gas midstream capabilities from our extensive U.S. operations together with the advantageous cost of capital we can bring to the infrastructure needs of this active area.''

Encana has been selling assets to raise money to finance its other far-flung natural gas operations across North America.

The natural gas giant sold its Fort Lupton gathering system and processing plant in Colorado earlier this year and recently agreed to sell part of its Piceance midstream business, also in the U.S. state.

“This sale is another example of Encana redirecting midstream capital into our higher-return core business of growing natural gas and liquids production,'' said said Renee Zemljak, Encana's executive Vice-president of midstream marketing and fundamentals.

“With the Cabin sale, proceeds totalling C$1.1 billion from these three midstream asset sales will strengthen our balance sheet, which will provide greater financial flexibility going into 2012,''

Encana, as operator, has led construction of the Cabin gas plant to process gas from producers in the Horn River natural gas play. The plant is about 70 per cent complete.

For Enbridge, which operates Canada's largest oil pipeline, the deal expands its natural gas processing business, adding to the company's gas distribution network in Ontario, Quebec, New Brunswick and New York state.

“Phases 1 and 2 of Cabin will generate an attractive return and provide a significant and growing earnings contribution for years to come, which aligns very well with Enbridge's reliable business model,'' Monaco added.

“The investment also comes with substantial growth potential from future development of phases 3 through 6.''