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On October 13, 2011, the National Energy Board granted KM LNG Operating General Partnership an export licence for its proposed Kitimat LNG Project, an LNG export facility on the west coast of British Columbia. This export licence represents the first time since deregulation of Canada's natural gas markets that the National Energy Board has considered an export of LNG from Canada. This decision serves as an important precedent for industry participants that wish to export LNG from Canada in the future. The decision also sends a strong signal that exporting LNG from Canada to Asia is in the Canadian public interest.

Background

Export licences are required from the National Energy Board (NEB) whenever oil or natural gas is proposed to be exported for a term exceeding two years. Historically, export licences were used to export natural gas from Canada to major utilities in the United States under long-term purchase and sale contracts.

Kitimat LNG Project

The proposed Kitimat LNG project involves the construction of an LNG export terminal near the Port of Kitimat on the northern coast of British Columbia. The export terminal will have an initial capacity of 0.7 billion cubic feet per day (Bcf/d) of natural gas, with expansion capacity to add an additional 0.7 Bcf/d. The Kitimat LNG terminal will connect to the Pacific Trails Pipeline (PTP), which is a proposed 1.4 Bcf/d pipeline running approximately 463 kilometres from the export terminal to Spectra Energy's existing pipeline network, which ties into the broader North American natural gas grid. The proponents of both the Kitimat LNG terminal and the PTP are partnerships between Apache Canada, EOG Resources Canada and Encana Corporation.

Apache Canada and EOG Canada plan to build the Kitimat LNG facility on Bish Cove, approximately 400 miles north of Vancouver. The facility is planned for an initial output capacity of 5 million metric tonnes per annum Apache Canada is the managing partner of KM LNG Operating General Partnership, which owns 51 percent of the Kitimat LNG facility and is the facility operator. EOG Canada, through its wholly owned subsidiaries, owns the remaining 49 percent of the Kitimat LNG facility.

Kitimat LNG partners Apache Canada Ltd. (Apache Canada) and EOG Resources Canada Inc. (EOG Canada) have agreed to purchase the 50 percent interest in the Pacific Trail Pipelines Limited Partnership (PTPLP) they do not own from Pacific Northern Gas Ltd. (PNG) for $50 million.  Apache Canada and EOG Canada will pay PNG $30 million on closing – expected by the end of February – and a second payment of $20 million when the purchasers decide to proceed with construction of the Kitimat liquefied natural gas (LNG) export facility.

Acquiring the PTP is an important step in building a comprehensive system that will enable Apache and EOG to tap Asian markets for our abundant natural gas resources in the Horn River Basin and elsewhere in Western Canada.

PTPLP is planning to build a 287-mile, 36-inch diameter underground line from Summit Lake, British Columbia, to Kitimat, the location of the planned LNG export terminal on the northern British Columbia coast. Following the completion of the purchase, Apache Canada will own 51 percent of the partnership and EOG Canada, through its wholly owned subsidiaries, will own the remaining 49 percent.

PNG will operate and maintain the planned pipeline under a seven-year agreement with Apache Canada and EOG Canada with provisions for five-year renewals. Apache Canada and EOG Canada also agreed to 20-year transportation service arrangements requiring them to use a portion of PNG's current pipeline capacity.

About Apache Canada Ltd.

Apache Canada Ltd., a subsidiary of Apache Corporation (NYSE:APA)(NASDAQ:APA), is one of Canada's top oil and gas producers with operations in Alberta, British Columbia and Saskatchewan.

About EOG Canada

EOG Resources Canada Inc. is a wholly owned subsidiary of EOG Resources, Inc., one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, Trinidad, the United Kingdom and China. (Mondaq, 10/17/2011, Marketwire, 2/7/2011)