Kitimat’s mayor says he’s not unduly worried that Chevron has announced it will not be spending any more money on the planned Kitimat LNG project.
“They announced back in 2019 they wanted to sell its stake. So this is not a surprise to us. It’s basically status quo,” said Phil Germuth of the mid-March decision by Chevron which owns 50 per cent of the planned liquefied natural gas project and its accompanying Pacific Trail Pipeline component that would pump gas from northeastern B.C.
The Australian company Woodside owns the remaining 50 per cent and prior to the mid-March Chevron announcement indicated it would continue its financing.
Both the LNG facility and the pipeline have received environmental approvals.
Germuth said Chevron still has commitments to keep the project in what he termed care and maintenance relating to pre-construction work that has already been committed.
That pre-construction work, in addition to extensive studies needed for environmental and regulatory approval, included site preparation at the intended Bish Cove facility site and improvements to the access road.
“Despite the many challenges posed by COVID-19, Chevron engaged in a process to divest while continuing to work with its joint venture partner, Woodside, on agreed project activities that brought value to the asset or were required for regulatory and operational compliance. At this time, it is Chevron’s intent to cease Chevron-funded further feasibility work for the proposed Kitimat LNG project,” stated Chevron in a release.
As planned, Kitimat LNG would produce 18 million tonnes of LNG a year, more than the 13 million tonnes a year that LNG Canada would produce at its facility currently under construction at Kitimat.
Germuth said he and the Kitimat council had not anticipated construction on Kitimat LNG would start while work at LNG Canada was in full swing and remain hopeful Woodside would one day proceed.
“We had thought that as LNG Canada ramped down, Kitimat LNG would ramp up,” said Germuth.
“With two such large projects, the impact on the community, the region and province would be huge,” he said. “For one thing, where would you find the thousands of workers needed.”
“One thing we do know is that the demand for LNG will outstrip supply and for that, we’re hopeful,” Germuth added.
“In a perfect world we had been banking on anyway a ramp down on LNG Canada and a ramp up of Kitimat LNG for 10 to 12 years of sustained economic activity.”
Kitimat LNG has gone through several rounds of ownership changes as well as engineering and design changes since first proposed more than a decade ago.
Under Chevron and Woodside, the effort has been to reduce costs to increase economic competitiveness.
One major shift was to use electricity to power the equipment needed to supercool natural gas into liquid form for transport overseas.
That requirement for electricity has Kitimat LNG financing planning by BC Hydro to increase the amount of power running through the provincial crown corporation’s main transmission line running between Prince George and Terrace.
BC Hydro would do that be adding three capacitor stations, equipment that would enable the existing line to carry more power.
From B.C. Hydro’s Skeena Substation south of Terrace, B.C. Hydro would then need to add a power transformer and build a dedicated line to Kitimat, work that would include a new substation near Kitimat.
That planning work is continuing despite Chevron’s announcement, an official from BC Hydro said.
“We’ve been in communication with Kitimat LNG and have not been asked to stop any work,” said Kevin Aquino.
“Like other interconnection requests, Kitimat LNG is funding BC Hydro’s work on this stage of the interconnection process.”