PNG Negotiates Option Payment for Utilization of Excess Pipeline Capacity on Its Western B.C. System

Thursday, September 25, 2008 8:53 PM

Symbols: DUK, MEOH, SE

(Source: Marketwire) tracking

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 25, 2008) - Today Pacific Northern Gas Ltd. ("PNG") (TSX:PNG)(TSX:PNG.PR.A) filed an application with the B.C. Utilities Commission ("Commission") for approval to provide LNG Partners, LLC ("LNG Partners") with an extendable option for up to $3 million to contract for a minimum 75 MMcf per day of firm gas transportation service using existing capacity on PNG's Western B.C. pipeline system. If LNG Partners exercises its option it would utilize the transportation service to deliver natural gas to a floating natural gas liquefaction vessel to be owned and operated by Maverick LNG Holdings Ltd. or an affiliated joint venture on the Douglas Channel near Kitimat, B.C. The LNG would then be transferred to other LNG carriers for export.

Following Commission approval of the arrangement, LNG Partners will pay a $1.5 million non-refundable fee to PNG which will give LNG Partners an exclusive 6 month option to contract firm gas transportation capacity for a 3 to 5 year primary term, with a right to renew for an additional 3 to 5 year term. Alternatively, LNG Partners may extend the initial option period for another six months on payment of an additional option fee of $1.5 million. PNG has applied for Commission approval to apply approximately two-thirds of the initial option fee to reduce customer rates in 2009 with the remaining one-third to compensate PNG for the reduced return it has earned since the Methanex closure at the end of 2005. If LNG Partners exercises its option, the PNG pipeline system would be at full capacity utilization, generating almost $15 million per year of incremental revenue for the benefit of PNG and its customers compared to approximately $12 million previously received annually from Methanex. The commencement date for the transportation service is expected to be at the beginning of 2011.

Roy Dyce, President and CEO of PNG, said, "The option fee from LNG Partners will benefit PNG's stakeholders and, if the option is exercised, even more substantial benefits will result from the significant increase in PNG's transportation system utilization." PNG is continuing to develop the KSL pipeline project through its interest in Pacific Trail Pipelines Limited Partnership.

PNG can provide no assurances that the Commission will approve its application or that LNG Partners would exercise their option. Further, PNG can provide no assurances that the KSL pipeline project will proceed given the requirements for regulatory approvals and suitable commercial arrangements.

Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) owns and operates natural gas transmission and distribution systems. The Company's western transmission line extends from the Spectra Energy (formerly Duke Energy) gas transmission system north of Prince George to tidewater at Kitimat and Prince Rupert, and provides service to 12 communities and a number of industrial facilities. In the northeast, Pacific Northern's subsidiary Pacific Northern Gas (N.E.) Ltd. provides gas distribution service in the Dawson Creek, Fort St. John and Tumbler Ridge areas. Further information is available on the Company's website at: www.png.ca.