Encana gives up deal with PetroChina on shale gas

AP News
Posted: Jun 22, 2011 1:14 AM
Encana gives up deal with PetroChina on shale gas

Canadian natural gas supplier Encana says a $5.4 billion deal with PetroChina Ltd. for development of shale natural gas has fallen through.

The companies ended talks after they failed to reach agreement on key aspects of the deal involving Encana's Cutback Ridge assets in northeastern British Columbia, according to an Encana statement.

The deal would have been the largest-ever Chinese investment in Canada's energy sector, following a $4.65 billion investment in April 2010 by China Petroleum & Chemical Corp., or Sinopec, in Syncrude Canada Ltd., an operating oil sands project.

Encana, Canada's biggest natural gas provider, did not give details on the discussions with PetroChina. But it said it now plans to seek joint venture partners for various parts of the project, including its undeveloped resources, pipeline and processing, to maximize the value of the resources.

"We look forward to discussing these very attractive opportunities with an array of potential investors in the upcoming months," Randy Eresman, Encana's CEO, said in the statement.

PetroChina did not immediately respond to requests for comment.

PetroChina's interest in the project represented daily production of 255 million cubic feet of gas, proven reserves of 1 trillion cubic feet of natural gas and nearly 257,000 hectares (635,050 acres) of land.

Encana is also seeking investors for joint ventures involving assets outside Cutback Ridge, on undeveloped Horn River shale lands and in the Greater Sierra.

China's state-owned energy companies have invested heavily in overseas gas and oil projects, seeking to secure resources needed for their fast-growing economy.

But recently some of those deals have run into difficulties, especially over prices for natural gas.

Last week, Russian and Chinese leaders failed to reach a price agreement on a multibillion dollar deal for Russian gas monopoly Gazprom to guarantee annual supplies of 68 billion cubic meters of gas to China for 30 years, starting from 2015.

Moscow wanted to link the price to oil prices the way it does in Europe, but China considers any European-level price too high.