Calgary-based AltaGas Ltd. has sanctioned the Pipestone Natural Gas Processing Plant Phase II expansion project in the Alberta Montney Shale region.
Construction is set to begin this year on the expansion, which is fully permitted. The project would provide an additional 100 MMcf/d of sour deep-cut natural gas processing capacity and an additional 20,000 b/d of liquids-handling capabilities, according to AltaGas.
AltaGas announced the final investment decision (FID) for the project late last month upon closing its acquisition of the existing Pipestone processing complex and adjacent Dimsdale gas storage facility from Tidewater Midstream and Infrastructure Ltd. for C$650 million ($487 million). The asset package also included the Pipestone condensate truck-in/truck-out terminal and associated gathering pipeline systems required to operate the assets.
The Dimsdale facility connects to the Nova Gas Transmission Ltd. and Alliance natural gas pipeline systems, two of the main routes for Western Canadian natural gas to reach local and U.S. markets.
Western Canadian natural gas prices have been under pressure for years amid a lack of infrastructure to move gas to demand centers. Over the past year alone, NOVA AECO C gas prices have tumbled from around C$4.100/GJ to C$1.740/GJ as of Jan. 2, NGI historical price data show. Alliance (APC)-ATP prices have followed a similar trajectory.
“The Pipestone Phase II expansion project is now 100% contracted under long-term take-or-pay agreements with a combination of marquee independent and investment grade producers,” AltaGas management said. “All Pipestone Phase II customers who are existing Pipestone Phase I customers have also agreed to multi-year contract extensions, further improving the long-term commercial profile of the Pipestone Assets.”
The expansion “will be constructed on a fixed price turnkey basis for the majority of the capital costs and will deliver critical gas processing and liquids handling capacity in the Pipestone region, which is one of the fastest growing liquids-rich natural gas developments in Canada,” the firm added.
AltaGas’ midstream business includes global export facilities and processing, fractionation, logistics and storage infrastructure for natural gas and natural gas liquids (NGL), including liquefied petroleum gas (LPG).
“Closing this transaction and reaching a positive FID on Pipestone Phase II significantly strengthens our position in one of Canada’s most prolific resource plays,” said AltaGas CEO Vern Yu. “The transaction also diversifies our customer base, brings meaningful long-term LPG supply to our global exports platform, and provides long-term growth through the Pipestone Phase II expansion and has the potential for additional expansion phases."
The company said it intends “to support the robust growth in the Alberta Montney with key gas processing, liquids handling and gas storage assets, all with global LPG connectivity that will facilitate the best outcomes for the Canadian energy industry.”
AltaGas plans to advance a C$1.2 billion ($900 million) capital program in 2024.
“After a decade of being structurally challenged by a lack of takeaway capacity, Canada is set to deliver significant natural gas and NGL production growth in the years ahead, with our midstream business realizing strong growth opportunities,” Yu said in December. “As liquefied natural gas projects on the Canadian West Coast come online in the next couple of years, we expect numerous customer-backed opportunities to add infrastructure to support these developments. This includes opportunities to connect increasing Canadian liquefied petroleum gasses and other vital energy products into premiere downstream markets in Asia.” The company also said last month monetization of its 10% stake in the Mountain Valley Pipeline “is the most immediate path” toward reaching its debt reduction targets.
