Billion-dollar gas plant approved for Dawson Creek area

A partnership involving Veresen Inc. (TSX:VSN) and Encana Corp. (TSX:ECA) that has already committed $1.5 billion to...

Townsend gas plant

A partnership involving Veresen Inc. (TSX:VSN) and Encana Corp. (TSX:ECA) that has already committed $1.5 billion to two new gas processing plants in the Dawson Creek area has announced plans to spend nearly $1 billion more on a third gas processing plant.

Veresen is already building two new gas plants in the Dawson Creek area – the Sunrise and Tower plants – with a combined capital cost of $1.5 billion.

Veresen announced March 9 that the Cutbank Ridge Partnership (Encana and Mitsubishi) has also approved a third plant, the Saturn 2, which will be built at a cost of $930 million.

Last year, Veresen acquired natural gas gathering and compression assets from Encana and the Cutbank Ridge Partnership.

As part of that deal, Veresen committed to $5 billion worth of investments to build out additional assets for Encana and the Cutbank Ridge Partnership. Under the agreement, Veresen is funding 55% to 60% of the three new gas plants.

The investments underscore the attraction of the Montney formation in Northeastern B.C.

North America is already awash in natural gas. What is drawing companies like Veresen to invest in new gas processing plants and pipelines in the Montney is not necessarily the gas itself, but the liquids: oil, condensate, butane and propane.

Condensate is a type of light oil that is used to dilute the heavier bitumen in Alberta’s oil sands.

Another partnership building a new gas processing plant north of Fort St. John is AltaGas Ltd. (TSX:ALA) and Painted Pony Petroleum Ltd. (TSX:PPY).

The $350 million Townsend plant about 70% complete.

nbennett@biv.com