EnCana (NYSE:ECA) is involved with two other exploration and production companies to build a liquefied natural gas (LNG) facility in western Canada, to export future production from the Horn River Shale to Asia. The companies also plan to build a pipeline system, to enable the transportation of natural gas to this new facility.
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Liquefied Natural Gas
The development of reserves from the Horn River Shale requires an extensive build out of infrastructure, to process and transport the natural gas. EnCana is partnering with Apache Corporation (NYSE:APA) and EOG Resources (NYSE:EOG) to build a portion of these assets.

EnCana has a 30% interest in the Kitimat LNG Project, which is currently under construction in British Columbia. EnCana plans to transport natural gas from the Horn River Basin to this facility where it will be liquefied and exported to Asia. Kitimat will have initial processing capacity of 700 million cubic feet per day and be in operation by 2015. The plant is set up for capacity to be expanded to 1.4 billion cubic feet per day, if needed.

Apache Corporation is the operator of Kitimat and owns 40% of the project. The company is involved in an upstream joint venture with EnCana on a 210,000 net acre position. EOG Resources is also involved and owns 30% of the project. The company has 157,500 net acres under lease, that is prospective for the Horn River Shale, and plans minimal drilling in 2011 needed to meet leasing requirements.

The three companies are also building the Pacific Trail Pipeline; a 288 mile pipeline that will connect the Kitimat LNG facility to an existing pipeline system owned by Spectra Energy (NYSE:SE). This pipeline already services the Horn River Basin, and other producing basins, in western Canada. The Pacific Trail Pipeline system is estimated to cost $1 billion and will be in service in 2015.

Other Operators
Quicksilver Resources (NYSE:KWK) is also attempting to secure midstream capacity, to transport its production from the Horn River Shale to end markets. The company has signed an agreement with TransCanada (NYSE:TRP) and plans to build a pipeline extension that will connect its gathering system to an existing TransCanada pipeline, in the area.

Spectra Energy is investing heavily to add additional processing and transport capacity, to handle production from the Horn River Shale. The company estimates that it will spend $1.5 billion from 2009 to 2013 on various projects. The Fort Nelson North Processing Facility is the latest of these projects and is near to the company's existing plants in the area. The company will have total processing capacity of 1.2 billion cubic feet of natural gas per day, once this project goes into operation in 2012.

Nexen (NYSE:NXY) is developing its own Horn River Shale acreage and has contracted with Spectra Energy for approximately 96 million cubic feet per day of capacity, at existing plants. The company plans to acquire additional capacity, as future midstream capacity comes into service.

The Bottom Line
Midstream infrastructure is essential to the development of emerging shale and unconventional resource plays in North America, and these operators are ahead of the curve in securing, or building, this capacity to accommodate future production. (For additional reading, take a look at What Determines Oil Prices?)

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