UPDATE 1-TransCanada to build $5 bln gas pipeline for Progress Energy

Jan 9 (Reuters) - TransCanada Corp said it would build a $5-billion pipeline for Progress Energy Canada Ltd to transport natural gas from the North Montney region in British Columbia to a proposed gas export plant at Port Edward on the Pacific coast.

Progress Energy Canada, which was formed after Malaysia's Petronas bought Canada's Progress Energy Resources Corp for C$5.2 billion in December, plans to build the plant for a cost of up to C$11 billion.

TransCanada, the country's largest pipeline company, said it would own and operate the Prince Rupert Gas Transmission project, expected to have an initial capacity of about 2 billion cubic feet of gas per day.

Progress Energy Canada and TransCanada expect to finalize definitive agreements in early 2013, TransCanada said.

TransCanada also plans to spend about $1 billion to $1.5 billion to extend its Nova Gas Transmission Ltd system in northeast British Columbia to connect to the Prince Rupert Gas Transmission project and to additional North Montney gas supply from Progress and other parties.

Montney, one of the largest shale region in North America, has attracted interest from many multinational oil and gas companies looking to export gas to Asia where prices are much higher.