Chevron cuts spending on LNG project
U.S. company plans to continue development of gas fields in B.C.’s Liard Basin
CALGARY — Chevron Corp. is significantly slowing spending on the Kitimat liquefied natural gas project in British Columbia amid a crash in crude prices and global competition.
The San Ramon, Calif.-based producer’s move follows Petroliam Nasional Bhd.’s December delay of a final investment decision on its $36-billion Canadian LNG project and BG Group Plc’s pause of development at its Pacific Coast proposal in the country in October.
“People are pretty cautious right now in the LNG market,” chief executive officer John Watson said Friday, adding it’s not clear all the new projects being considered can be profitable at lower prices.
The price of LNG is linked to oil, which has dropped more than 50 per cent since June highs, prompting major energy companies to cut jobs and capital spending. Chevron on Friday slashed its drilling budget by the most in 12 years. The company doesn’t plan to make final decisions on projects this year, other than for its Tengiz field in Kazakhstan, Watson said.
Chevron is cutting spending on LNG worldwide by 20 per cent this year to $8 billion, Watson said.
While Chevron curbs spending for Kitimat LNG, it will continue to develop gas fields in B.C.’s Liard Basin to support the export facility, secure permits and reach agreements with aboriginal groups, Watson said. The company is aligned with Woodside Petroleum Ltd. on the project, he said.
Woodside in December agreed to pay Apache Corp. $2.75 billion for stakes in the Kitimat LNG project and the Wheatstone venture in Australia.
Chevron will continue efforts to secure marketing agreements with prospective buyers from Kitimat LNG in 2015 and negotiate with the B.C. government on its policies, Ray Lord, a spokesman for the company, said. Front-end engineering and design work will continue, as the companies try to reduce costs of the plant and pipeline, he said.
The Chevron- led Kitimat project is among 18 proposed for Canada’s Pacific Coast to liquefy and export vast supplies of gas in shale deposits by tanker ships to buyers in Asia. None of the proponents have yet made a final decision to proceed.