Chevron Corp. is sticking with the proposed Kitimat LNG venture, saying it will look for a new partner after Apache Corp. pulled out of the project to export liquefied natural gas from British Columbia.
Chevron vice-chairman George Kirkland said Friday that natural gas reserves in northern British Columbia appear attractive for the project.
The Canadian units of Houston-based Apache Corp. and Chevron Corp. of San Ramon, Calif., each own 50 per cent of Kitimat LNG. Apache, under pressure from activist investor Jana Partners LLC, said Thursday that it is exiting Kitimat LNG as part of the energy company's restructuring.
Industry analysts have noted that companies in the LNG sector face enormous capital costs and must cope with the long lead times to build export terminals.
"We need to get our partnership resolved," Mr. Kirkland said during Chevron's quarterly conference call with analysts. "That means Apache needs to move through the issues, and we need to get a new partner in. That needs to happen."
Chevron won't be increasing its stake beyond 50 per cent, but it is willing to take over Apache's "upstream" role and become operator on the natural gas drilling side in the Liard and Horn River plays in northern B.C., he said.
He confirmed that Kitimat LNG needs to reach its target of signing up long-term buyers in Asia for 60 to 70 per cent of the project's production before any final investment decision is made on proceeding. "We're not going to do a project unless it's economic," Mr. Kirkland said. "We need to get to closure on the partnership."
TransCanada Corp. announced in June that its Merrick Mainline gas pipeline project would connect with Kitimat LNG's proposed Pacific Trail Pipeline that is slated to run from Summit Lake to a planned export terminal in Kitimat.
"I feel very good about the resource assessment," Mr. Kirkland said. "Then of course, we've got to focus on the pipeline and the pipeline corridor."
The B.C. government, which has been touting the province's fledgling LNG industry as the ticket to economic prosperity, played down the impact of Apache's withdrawal from Kitimat LNG – one of the "Big Three" projects envisaged for B.C.
"We remain committed to developing a competitive liquefied natural gas export industry in British Columbia," Rich Coleman said in a statement released by the province's Natural Gas Development Ministry, which he heads as the cabinet minister. "We look forward to hearing more details about Kitimat LNG's future as the project moves forward."
There have been 15 B.C. LNG projects proposed so far, though industry observers say only four at most will come to fruition.
Chevron is also open to reducing its own stake in Kitimat LNG. "We do have available some small amount of working interest that we would provide to an LNG buyer," Mr. Kirkland said.