Woodside Petroleum Ltd. of Australia will be joining a B.C. liquefied natural gas venture led by Chevron Corp., providing a much-needed lift to the Kitimat LNG project.
Kitimat LNG suffered a setback last July, when Houston-based Apache Corp. disclosed that it wanted to exit the project. But after the deals announced Monday, Kitimat LNG finds itself well-positioned to make progress in 2015, a welcome sign for British Columbia's fledgling LNG industry after two rival projects opted this fall to delay their final investment decisions.
In joining Kitimat LNG, Woodside will be co-owner with Chevron in a project viewed by industry analysts as being among the top three major LNG export proposals in the province. Apache will be selling its 50-per-cent stake in the B.C. joint venture to Woodside, part of a broader transaction that will also see the Australian company acquire Apache's 13-per-cent interest in the Wheatstone LNG project in Western Australia.
Kitimat LNG is one of 18 B.C. proposals to export natural gas in liquid form announced so far, though no final investment decisions have been made yet.
The deals between Woodside and Apache are set to close in the first quarter of 2015. Woodside is poised to pick up natural gas drilling properties in the Horn River and Liard shale plays in northeastern British Columbia. The proposed Pacific Trail Pipeline would transport natural gas from the northeast part of the province to an LNG export terminal near the community of Kitimat in the northwest.
Combined with other Australian energy assets to be sold to Woodside, the deals will result in net proceeds of $3.7-billion (U.S.) for Apache, including nearly $1-billion reimbursed for capital spending on the LNG projects from June 30, 2014, until the closing of the deals. Apache has been facing pressure from activist investor Jana Partners LLC to sell some global energy assets.
"Chevron looks forward to welcoming Woodside Petroleum to the Kitimat LNG project," San Ramon, Calif.-based Chevron said in a statement. "Woodside Petroleum brings significant experience to the Kitimat LNG project, and Chevron has a long history of working with Woodside, primarily through our joint venture in the North West Shelf LNG project in Australia."
Woodside and Chevron each hold a 16.67-per-cent stake in North West Shelf, which began LNG shipments in 1989. Chevron's other assets in its global portfolio include its 64.1-per-cent stake in Wheatstone LNG and 47.3-per-cent interest in Gorgon LNG in Australia.
Chevron said having Woodside as its new partner in Kitimat LNG "does bring resolution to one of the key elements required to reach a final investment decision," but there is still work to do on issues such as more consultations with First Nations to confirm or win their support. Kitimat LNG also needs to sign firm marketing pacts with LNG buyers in Asia, iron out details related to the B.C. government's tax regime and scrutinize front-end engineering and design.
In early 2014, Irving, Tex.-based Fluor Corp. and JGC Corp. of Yokohama, Japan, announced that they had won the engineering, procurement and construction contract for the planned Kitimat LNG export terminal at Bish Cove.
Canada's National Energy Board has approved export licences for nine B.C. LNG proposals, including one dating back to 2011 for Kitimat LNG. The NEB is reviewing Woodside's application in July for its own licence to export LNG from Grassy Point, located near Prince Rupert in northwestern British Columbia.
Kitimat LNG is using the former site of the Eurocan pulp and paper mill as a preliminary work camp, with plans to revamp the Kitimat property so it can handle up to 5,000 construction workers should the Bish Cove terminal get the go-ahead to be built.
In early December, Malaysia's state-owned Petronas announced an indefinite delay to the Pacific NorthWest LNG joint venture. That followed BG Group PLC's October decision to postpone a final investment decision on its Prince Rupert LNG project until 2017, or one year later than originally expected.