A Chevron logo appears at a gas station in Miami on July 25, 2011. The Canada Energy Regulator says it has approved an application from Chevron Canada to export natural gas from the Kitimat LNG project for a term of 40 years over environmental opposition. THE CANADIAN PRESS/AP, Lynne Sladky

Chevron’s move to exit Kitimat LNG project a dash of ‘cold water’ for gas industry

Canada Energy Regulator approved a 40-year licence to export natural gas for Kitimat LNG

The decision by Chevron Corp. to try to sell its 50 per cent stake in the Kitimat LNG project on the B.C. coast throws a symbolic dash of “long-dated cold water” on growth in the Canadian natural gas industry, an analysis says.

The California-based company announced the potential sale in its 2020 budget, adding it would also cut funding to gas-related ventures including Kitimat LNG and its shale gas fields in the northeastern United States.

It also announced a charge of at least US$10 billion against its assets because of expected lower long-term prices for oil and gas.

“With (Tuesday’s) budget, Chevron threw some long-dated cold water on the Canadian gas macro, as the company announced they are reducing funding for the Kitimat LNG project,” said analysts at Tudor Pickering Holt & Co. in a report Wednesday.

“While we don’t think investors were baking in any long-term gas demand related to the project, any advancements likely would have been well received.”

The analysts pointed out Chevron has access to about 100 million cubic feet per day of gas production to supply the proposed project to super-cool and ship out as much as 2.3 billion cubic feet of gas per day.

Chevron’s move is the latest in a string of setbacks for B.C.’s nascent liquefied natural gas industry which once boasted nearly 20 proposed projects with the implied promise of a new higher-priced export market in Asia for Western Canada’s abundant natural gas resources.

READ MORE: LNG Canada project gradually taking shape

Chevron is not the first company to want out of Kitimat LNG — it bought its 50 per cent stake from Calgary-based Encana Corp. and Houston-based EOG Resources, Inc., in December 2012.

In the same transaction, Houston-based producer Apache Corp. raised its stake in Kitimat LNG from 40 per cent to 50 per cent. But two years later, under pressure from activist investors, it sold that stake to Australian Woodside Petroleum Ltd., which remains Chevron’s partner.

Malaysian energy giant Petronas cancelled its Pacific NorthWest LNG project in 2017 and later joined the Royal Dutch Shell-led $40-billion LNG Canada project, which remains the only project under construction after being green-lighted in 2018.

Finance Minister Bill Morneau said Wednesday the federal government still sees a “very positive opportunity” for LNG in Canada, suggesting Chevron remains committed to seeing the project move forward despite its efforts to rebalance its asset portfolio.

READ MORE: Coastal GasLink receives first delivery of pipe sections

Earlier this month, the Canada Energy Regulator approved a 40-year licence to export natural gas for Kitimat LNG, doubling its previous licence duration and nearly doubling the potential output of the facility to 18 million tonnes of liquefied natural gas per year, a substantial increase over the previous 10-million-tonne licence which was set to expire at the end of this year.

Chevron said its decisions are part of its global portfolio optimization effort focused on improving returns and driving value.

“Although Kitimat LNG is a globally competitive LNG project, the strength of Chevron Corp.’s global portfolio of investment opportunities is such that the Kitimat LNG Project will not be funded by Chevron and may be of higher value to another company,” Chevron said in a statement.

“Chevron intends to commence soliciting expressions of interest for its interests in the Kitimat LNG Project. No timeline has been set to conclude this process.”

The company said it would continue to work with Woodside and government and First Nations partners during the process.

The Kitimat LNG project includes upstream natural gas lands in the Liard and Horn River Basins in northeastern B.C., the 471-kilometre Pacific Trail Pipeline and the gas liquefaction facility at Bish Cove near Kitimat.

Dan Healing, The Canadian Press


Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Saanich man killed in Alberta shooting

Victim is 30-year-old Greater Victoria man, say police

Victoria ranks as 16th least affordable city in the world

Vancouver, as well as the Fraser Valley, Nanaimo and Comox Valley also crack the Top 25

Saanich’s plastic bag ban won’t be affected by the Supreme Court ruling against Victoria

Council amended Saanich’s ban to align with the B.C. Court of Appeal’s ruling in November

Victoria security company sees jump in clients in lower downtown after influx of thefts

Themis Security has signed several new contracts for businesses in lower Yates, Johnson streets area

Powerful Russian folk trio makes triumphant return to city

Trio Voronezh back on Victoria stage for first time since appearing at Coupe Mondiale in 2013

Fashion Fridays: The basics you need for your body type

Kim XO, helps to keep you looking good on Fashion Fridays on the Black Press Media Network

Greater Victoria Crime Stoppers wanted list for the week of Jan. 21

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

Ucluelet and Tofino mayors call for “calmness” and “empathy” as highway closure cuts communities off from supplies

Ministry of transportation expects to open road for “essential travel only” from noon-8 p.m. Friday.

Was Bigfoot just spotted on a Washington State webcam?

Sherman Pass is rougly 70 kilometres south of Grand Forks, B.C.

B.C. employer health tax wins ‘paperweight award’ for red tape

Businesses forced to estimate payroll, pay new tax quarterly

Red Carpet Valentine’s event will aid Sooke charities

This is a chance to have that “red carpet” experience

New U.S. LNG terminal near northwestern B.C. town proposed

AlaskCAN International LNG wants terminal just over Canadian border, but using B.C gas

Couple wonders who’s in a Cariboo photo that’s been hanging in their home for years

Charles and Lynn Dick believe the image was taken at the 70 Mile Road House

‘I would not go’ to China says B.C. traveller concerned about coronavirus

Alice Li said she goes to China every other year but would scrap any travel plans

Most Read