Chevron’s Kitimat exit dents country’s LNG ambitions

CALGARY Chevron Corp. is considering putting its entire stake in the proposed liquid natural gas project in British Columbia on the block, in a blow to Canada’s aspirations to build a robust LNG industry.

“Although Kitimat LNG is a globally competitive LNG project, the strength of Chevron Corporation’s global portfolio of investment opportunities is such that the Kitimat LNG Project will not be funded by Chevron and may be of higher value to another company,” the company said on Tuesday.

The San Ramon, Calif.-based company said its Canadian unit will look for buyers for its 50-per-cent interest in the Kitimat LNG Project, but set no timeline to conclude the process. Chevron’s other Canadian projects are not part of the sale.

The company said it would continue to work closely with its joint venture partner Woodside Petroleum Ltd, which owns the other half of the company, and First Nations partners during the process.

Chevron’s comments have dented some of the optimism in the Canadian natural gas sector, which had cheered the construction of the $40-billion, Royal Dutch Shell Plcled LNG Canada project and the prospect of Pacific Oil and Gas Ltd.’s smaller Woodfibre LNG project.

“It would have been nice to LNG facilities come on stream shortly after (Shell’s) LNG Canada, but the comments that Chevron made yesterday may be tempering this type of enthusiasm,” Raymond James analyst Jeremy Mccrea said.

“To see them potentially take the writedown on their gas reserves and make the comments they did is a bit of a reversal from what we’ve seen from them,” he said, adding the company might be “taking a pause” given the outlook for global LNG prices.

Asked whether there was an obvious buyer for the Chevron’s stake in the project, which it co-owns with Woodside, Mccrea said “nobody comes to mind.” But he noted that groups like Rockies LNG have been actively looking to build a project.

Rockies LNG, a consortium of B.C. and Alberta natural gas producers, did not respond to a request for comment.

The move to sell the Kitimat project comes as Chevron took an axe to its balance sheet Tuesday and wrote down the value of its assets by $10 billion to $11 billion this quarter, related to a deepwater Gulf of Mexico project and shale gas in Appalachia.

“With capital discipline and a conservative outlook comes the responsibility to make the tough choices necessary to deliver higher cash returns to our shareholders over the long term,” chief executive Michael Wirth said.