An $860 million natural gas processing plant is under construction in B.C. When completed, it will be the largest built in Western Canada in the last 30 years. Veresen Inc. announced that the Cutbank Ridge Partnership (CRP), a partnership between Encana Corporation and Cutbank Dawson Gas Resources Ltd., a subsidiary of Mitsubishi Corporation, has sanctioned the Sunrise gas plant, to be located in the Montney region near Dawson Creek in northeastern British Columbia.
In late 2014, Veresen Midstream Limited Partnership owned 50 per cent by Veresen and 50 per cent by affiliates of Kohlberg Kravis Roberts & Co. L.P. (KKR), entered into a fee-for-service arrangement with Encana and CRP to undertake up to $5 billion of new midstream expansion for those parties in the Montney region, with the Sunrise gas plant being the first newly sanctioned project under the agreement. The estimated capital cost for the project (plant and ancillary facilities) is $860 million.
Veresen Midstream will fund about 60 per cent of the Sunrise gas plant’s construction costs with its existing $1.275 billion credit facility, which is largely undrawn. The balance of the funding will be contributed over time by Veresen and KKR. Veresen intends to fund its share of future contributions to Veresen Midstream with ongoing proceeds received from equity issued in connection with Veresen’s Premium Dividend TM and Dividend Reinvestment Plan. Encana will oversee the project management and construction of the facility on behalf of Veresen Midstream. Construction of the Sunrise gas plant has started, with the facility expected to be in-service in late 2017. Veresen Midstream has invested approximately $130 million in the facility to date.
"This is the largest gas plant to be commissioned in western Canada in the last 30 years and we are excited to partner with CRP on this facility," said David Fitzpatrick, CEO of Veresen Midstream.
"Upon start-up of the Sunrise plant, Veresen Midstream’s footprint in the Montney will grow substantially and we look forward to continuing to work with Encana and CRP, as well as other producers in the region, to unlock the value of this important resource play."
Others involved with the project chimed in.
"Within Veresen Midstream’s footprint in the Dawson Creek area, development activity continues to be strong, driven by very low supply costs for Montney gas production in the region," added Don Althoff, president and CEO of Veresen. "I’m excited about the growth potential of Veresen Midstream and the contribution of this business to Veresen’s earnings profile."
Veresen Midstream anticipates that CRP will proceed to a final investment decision for the Tower gas plant in late 2015. CRP has also proposed to add an incremental 200 mmcf/d of compression and 400 mmcf/d of refrigeration capacity to the Saturn compressor site, effectively converting this site into a 400 mmcf/d gas plant. According to Veresen, a final investment decision for this project could also be made in late 2015 or early 2016. The projects, along with assets acquired on March 31, 2015, will be part of Veresen Midstream’s commitment to provide up to $5 billion of new gas gathering and processing infrastructure to Encana and CRP in the Montney area.
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