Paramount has completed the first phase of its Deep Basin expansion with the re-commissioning of the Musreau Refrig Facility. The next major milestone will be the start-up of the Musreau and Smoky deep cut facilities, which will represent a major step change for Paramount, as Kaybob COU sales volumes are expected to increase more than four times 2012 levels by the end of 2014.
Musreau Deep Cut Facility
Paramount's wholly-owned Musreau Deep Cut Facility is designed to capture incremental volumes of NGLs from the Company's Deep Basin liquids rich gas production that would otherwise be sold as slightly higher heat content natural gas. The incremental liquids are captured by cooling the natural gas stream sufficiently to change the phase of the components from a gas to a liquid and then separating these streams using gravity. Liquids yields from the facility will vary depending on the liquids content of the gas being processed and the temperature to which Paramount cools the gas stream, among other factors.
Construction of the Musreau Deep Cut Facility commenced in the third quarter of 2012 following the receipt of regulatory approval. Site preparation is complete and piling and concrete work continues. Major equipment, including compressors, generators and storage vessels, are being delivered to the facility site over the course of the winter so that construction can continue through break-up. Paramount has awarded the structural steel contract and anticipates awarding the mechanical contracts shortly, with electrical and instrumentation contracts to follow. The project continues to be on-schedule and in-line with budget, with approximately $100 million incurred to December 31, 2012 and an additional $80 million budgeted for 2013 to complete construction.
Paramount is currently developing its commissioning plan. Commissioning of the facility is expected to begin towards the end of the third quarter of 2013 and span approximately two months, a process which involves testing and calibrating the individual components and control systems, purging vessels and piping, and pressure testing the system.
Paramount has secured a long-term firm service arrangement for the transportation of NGLs produced from its Kaybob area facilities commencing in December 2013. The Company has also entered into a long-term firm service arrangement with a midstream company for the de-ethanization and fractionation of NGLs volumes commencing in April 2014. The Company is working on procuring interruptible NGLs fractionation capacity for the period between the planned December 2013 start-up of the Musreau Deep Cut Facility and the commencement of the long-term firm service fractionation arrangement.
Kaybob COU sales volumes are expected to increase to approximately 30,000 Boe/d over the first few months after startup, as the operations team optimizes the facility's equipment and processes. Volumes initially processed through the Musreau Deep Cut Facility will be primarily from leaner Cretaceous wells in which Paramount's working interest generally ranges from 50 percent to 100 percent. Ethane is expected to remain in the gas stream until the midstream company completes an expansion of its de-ethanization facilities, which is scheduled to be operational in the second half of 2014. By late-2014, Kaybob COU sales volumes are expected to increase by over four times 2012 levels once a greater proportion of liquids-rich, 100 percent working interest Montney wells are flowing through the Musreau Deep Cut Facility, the expansion of the third party de-ethanization facility is completed and the Smoky Deep Cut Facility is on-stream.
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