Chevron’s financial strength, LNG operational experience and marketing expertise could help the project reach important sales and purchase offtake agreements with buyers.
Chevron took over EnCana and EOG’s 30 percent stakes each in Kitimat and stepped in as plant and Pacific Trail Pipeline operator. Apache will hold the remaining 50 percent and operate the natural gas production facilities feeding the plant.
“This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with longstanding relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America,” G. Steven Farris, Apache’s Chairman and Chief Executive Officer said in a statement.
There was some speculation in the Canadian press that Chevron’s lingering environmental liability in Ecuador – which it inherited as part of its Texaco acquisition in 2000 – could be problematic in environmentally-sensitive British Columbia. Several environmental groups and First Nations communities are staunchly opposed to oil and gas development in the province.
The proposed two-train Kitimat LNG Project is currently undergoing Front-End Engineering and Design and has a Canadian National Energy Board license to export 10 million tons per year of LNG, according to Chevron.
The Canadian government and companies operating there are anxious to access new oil and gas markets, particularly in Asia where gas typically trades at higher prices than in North America. The unconventional oil and gas development boom in the US is expected to decrease the appetite for Canadian petroleum resources south of the border. Additionally, Canadian heavy oil has been selling at a significant discount to lighter US volumes coming out of the Bakken region, which is effectively costing millions of dollars in lost revenue and royalties, thus providing further impetus to diversify market access.
“We look forward to working with the Governments of British Columbia and Canada, First Nations, and local communities to grow this development, realize the project’s long-term economic potential, and open new markets for Canadian natural gas,” Jeff Lehrmann, President, Chevron Canada Limited, said in a statement.