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

This concept artwork from July 2020 shows the inland port planned for the former Skeena Cellulose mill site in Terrace. (Image courtesy Hatha Callis, Progressive Ventures Group)
Terrace city council approves inland port OCP amendments

Project still requires zoning bylaw, development permit to continue

This copper frog pendant was made by Jamika Aksidan, a young Nisga’a artist who was recently recognized with an award for her work. (Photo courtesy Nisga’a Museum)
Nisga’a youth artist wins award

Award includes $500, exhibition in Nisga’a Museum

A BC Hydro outage is affecting nearly 4000 customers in Kitimat. The cause of the outage is under investigation. (Screenshot/BC Hydro Outage Map)
Cable fault responsible for Kitimat power outage, BC Hydro says

At its peak, the BC Hydro power outage affected near 4,000 customers

Graph showing the 2020 passenger totals at the Northwest Regional Airport in Terrace. (Submitted/Northwest Regional Airport)
New year brings an end to a turbulent 2020 at Northwest Regional Airport

Passenger totals half of what they were in 2019

Keith the curious kitten is seen on Nov. 4, 2020 at the Chilliwack SPCA. Friday, Jan. 22, 2021 is Answer Your Cat’s Questions Day. (Jenna Hauck/ Chilliwack Progress file)
Unofficial holidays: Here’s what people are celebrating for the week of Jan. 17 to 23

Answer Your Cat’s Questions Day, Pie Day and International Sweatpants Day are all coming up this week

(Phil McLachlan - Capital News)
‘Targeted’ shooting in Coquitlam leaves woman in hospital

The woman suffered non-life threatening injuries in what police believe to be a targeted shooting Saturday morning

JaHyung Lee, “Canada’s oldest senior” at 110 years old, received his first dose of the COVID-19 vaccine on Thursday, Jan. 14, 2021. He lives at Amenida Seniors Community in Newton. (Submitted photo: Amenida Seniors Community)
A unique-looking deer has been visiting a Nanoose Bay property with its mother. (Frieda Van der Ree photo)
A deer with 3 ears? Unique animal routinely visits B.C. property

Experts say interesting look may be result of an injury rather than an odd birth defect

Standardized foundation skills assessment tests in B.C. schools will be going ahead later than usual, from Feb. 16 to March 12 for students in Grades 4 and 7. (Black Press Media file photo)
B.C. teachers say COVID-affected school year perfect time to end standardized tests

Foundational skills testing of Grade 4 and 7 students planned for February ad March

Sooke’s Jim Bottomley is among a handful of futurists based in Canada. “I want to help people understand the future of humanity.” (Aaron Guillen - Sooke News Mirror)
No crystal ball: B.C. man reveals how he makes his living predicting the future

63-year-old has worked analytical magic for politicians, car brands, and cosmetic companies

Terry David Mulligan. (Submitted photo)
Podcast: Interview with longtime actor/broadcaster and B.C. resident Terry David Mulligan

Podcast: Talk includes TDM’s RCMP career, radio, TV, wine, Janis Joplin and much more

Seasonal influenza vaccine is administered starting each fall in B.C. and around the world. (Langley Advance Times)
After 30,000 tests, influenza virtually nowhere to be found in B.C.

COVID-19 precautions have eliminated seasonal infection

Prime Minister Justin Trudeau listens to a question during a news conference outside Rideau cottage in Ottawa, Friday, January 8, 2021. THE CANADIAN PRESS/Adrian Wyld
Trudeau says Canada’s COVID vaccine plan on track despite Pfizer cutting back deliveries

Canadian officials say country will still likely receive four million doses by the end of March

Most Read