South Korea is coming to northeast British Columbia.
It was reported this week that state-run Korea Gas has signed a deal with Canadian gas major EnCana covering three fields in the province of British Columbia. Korea Gas will take a 50% interest, for a price tag of $1.1 billion.
Details are scant. EnCana itself has not commented. But the deal almost certainly focuses on gas from the Horn River Basin/Montney shale play.
Major producers have been flocking to northeast B.C. since the initial fracture-stimulated wells were drilled in the Montney a few years back. Deliverability from these wells reportedly runs in the tens of millions of cubic feet per day. Putting the play right up there with top-producing shales in the U.S.
The issue for the HornRiver area is infrastructure. The terrain is remote, hilly, prone to landslides and a long-haul from major gas markets.
Bringing in a deep-pocketed partner like Korea Gas to pay some of the big up-front costs for infrastructure is a win for EnCana (and the entire region, as producers will likely be able to piggy-back off each other's pipeline networks to bring costs down).
But the most interesting implication of the deal is where the gas will be headed. Previously, it was assumed that HornRiver production would be hooked into Alberta gas infrastructure (there's a lot of Alberta production just across the provincial border in the Grande Prairie area), and then sent south to Chicago hubs.
But Korea is not buying into this play to sell gas to America. Korea Gas has an official mandate from Seoul to secure energy supplies for Korean domestic use.
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