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

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

Janice and Martin Green are grateful for their town’s community paramedicine program. (Photo courtesy of Janice Green)
Community paramedicine program a lifesaver in Tofino-Ucluelet

“It makes us feel more comfortable here knowing that we do have emergency services that kick in.”

A Tla-o-qui-aht First Nation guardian took this photo of dozens of vehicles parked along a forest service road in the Kennedy watershed. (Submitted photo)
POLL QUESTION: Would you like to see stricter enforcement towards illegal camping?

Would you like to see stricter enforcement towards illegal camping? READ MORE:… Continue reading

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Employers might be able to require COVID-19 vaccination from employees: B.C. lawyer

‘An employer must make the case’ using expert science, explains lawyer David Mardiros

Provincial health officer Dr. Bonnie Henry updates B.C.’s COVID-19 situation at the legislature, Jan. 11, 2021. (B.C. government)
Vancouver Island smashes COVID-19 high: 47 new cases in a day

Blowing past previous records, Vancouver Island is not matching B.C.s downward trend

Terrance Josephson of the Princeton Posse, at left, and Tyson Conroy of the Summerland Steam clash during a Junior B hockey game at the Summerland Arena in the early spring of 2020. (John Arendt - Summerland Review)
QUIZ: How much do you know about hockey?

Test your knowledge of Canada’s national winter sport

A woman injects herself with crack cocaine at a supervised consumption site Friday, Jan. 22, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Drug users at greater risk of dying as services scale back in second wave of COVID-19

It pins the blame largely on a lack of supports, a corrupted drug supply

Wet’suwet’en supporters and Coastal GasLink opponents continue to protest outside the B.C. Legislature in Victoria, B.C., on Thursday, February 27, 2020. THE CANADIAN PRESS/Chad Hipolito
‘We’re still in it’: Wet’suwet’en push forward on rights recognition

The 670-km Coastal GasLink pipeline was approved by B.C. and 20 elected First Nations councils on its path

Jennifer Cochrane, a Public Health Nurse with Prairie Mountain Health in Virden, administers the COVID-19 vaccine to Robert Farquhar with Westman Regional Laboratory, during the first day of immunizations at the Brandon COVID-19 vaccination supersite in Brandon, Man., on Monday, January 18, 2021. THE CANADIAN PRESS/Tim Smith - POOL
Top doctor urges Canadians to keep up with COVID measures, even as vaccines roll out

More than 776,606 vaccines have been administered so far

From the left: Midway RCMP Csts. Jonathan Stermscheg and Chris Hansen, Public Servant Leanne Mclaren and Cpl. Phil Peters. Pictured in the front are Mclaren’s dog, Lincoln and Peters’ dog, Angel. Photo courtesy of BC RCMP
B.C. Mounties commended for bringing firewood to elderly woman

Cpl. Phil Peters said he and detachment members acted after the woman’s husband went to hospital

Dr. Jerome Leis and Dr. Lynfa Stroud are pictured at Sunnybrook Hospital in Toronto on Thursday, January 21, 2021.THE CANADIAN PRESS/Frank Gunn
‘It wasn’t called COVID at the time:’ One year since Canada’s first COVID-19 case

The 56-year-old man was admitted to Toronto’s Sunnybrook Health Sciences Centre

An Uber driver’s vehicle is seen after the company launched service, in Vancouver, Friday, Jan. 24, 2020. Several taxi companies have lost a court bid to run Uber and Lyft off the road in British Columbia. THE CANADIAN PRESS/Darryl Dyck
Taxi companies lose court bid to quash Uber, Lyft approvals in British Columbia

Uber said in a statement that the ruling of the justice is clear and speaks for itself

Nanaimo Regional General Hospital. (News Bulletin file photo)
COVID-19 outbreak declared at Nanaimo hospital

Two staff members and one patient have tested positive, all on the same floor

A long-term care worker receives the Pfizer vaccine at a clinic in Nanaimo earlier this month. (Island Health photo)
All Island seniors in long-term care will be vaccinated by the end of this weekend

Immunization of high-risk population will continue over the next two months

Most Read