Encana mulls Chinese investment in B.C.

Calgary-based Encana Corp. announced Friday it has reached a memorandum of understanding with the state-owned China National Petroleum Corp. for a joint venture to develop natural gas fields in northeast British Columbia.

A memorandum of understanding is a preliminary step toward a final deal, which would eventually have China invest in developing Encana's properties in Horn River, Greater Sierra and Cutbank Ridge in the Montney formation.

In return, the Chinese company would gain a stake in the properties and gain an advanced understanding of the technology of natural gas development.

The properties cover almost 1.1 million hectares.

An eventual deal would "lower costs, reduce risks, increase our capital efficiencies, improve project returns, optimize production techniques and tap natural gas opportunities that would otherwise remain dormant for some time," Encana CEO Randy Eresman said.

Over the last three years, Encana has signed similar commitments with Canadian and U.S. partners for more than $4 billion US of joint-venture capital, of which about $900 million is to be invested in 2010.

Encana said it expects to take several months to negotiate terms acceptable to both Encana and the Chinese firm.

B.C. rights auction better than expected

The announcement came the same week the province's latest auction of petroleum exploration rights brought in twice as much revenue as the government expected.

Rights to 100 parcels of land around Fort St. John and Fort Nelson went for more than $400 million.

'It's a really good sign for the economy," Energy Minister Bill Bennett said.

"It's also a good sign British Columbia is viewed by investors as a safe place to invest and a productive place to invest and government needs the dollars to pay for things like health care and education, and this is the main way we do it."