04/08/2013 06:54 EDT | Updated 06/08/2013 05:12 EDT

Keyera to spend $210M on new sour gas pipeline, additions to Simonette plant

CALGARY - Midstream natural gas company Keyera Corp. (TSX:KEY) is spending $120 million to construct a 90-kilometre, 12-inch sour gas gathering pipeline in northwestern Alberta.

The Calgary-based company said Monday the sour gas gathering pipeline will run from the Wapiti region to the company's Simonette gas plant located northwest of Edson, Alta.

Construction is slated to begin in the fall of 2013, and expected to be in service by the second quarter of 2014, pending regulatory approvals.

The project is part of a long-term natural gas gathering and processing agreement between Keyera and NuVista Energy.

Keyera says it is also spending $90 million on modifications to its Simonette gas plant, including adding the capacity for refrigeration and building new condensate stabilization facilities.

The company says the initiatives will allow it to handle an additional 100 million cubic feet per day of raw natural gas, and 5,000 barrels per day of condensate.

Work on these additions will be done in the second half of next year.

The company says active drilling is continuing in the Montney geological zone in the Wapiti region due to a discovery of liquids-rich gas.

"We are excited about this opportunity to extend the capture area and expand the capabilities of our Simonette gas plant to meet the needs of our customers," says David Smith, president and chief operating officer of Keyera in a statement.

"These initiatives will provide cost-effective enhancements to our gathering, processing and liquids extraction services, to support continued development of the Montney zone in the area."

Keyera provides a number of services to the natural gas industry, including gathering, processing, storage and transportation.