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All bleak for Canadian LNG; Chevron dents hopes for Kitimat
Gary Park for Petroleumnews
Just as Canada seemed on the verge of achieving its dreams to create a global LNG hub it has been dealt internal and external blows.
With construction underway on the Shell-led C$40 billion LNG Canada project and hopes building that Chevron/Woodside were close to giving final investment approval to their C$20 billion Kitimat LNG venture two setbacks landed with a thud.
Canada’s newly installed Environment Minister Jonathan Wilkinson did a full about face on the endorsement issued by his predecessor Amarjeet Sohi that the federal government believed LNG exports should count toward Canada’s global greenhouse gas targets.
As he landed in Madrid for the latest United Nations climate change summit, Wilkinson said Canada had to be “very careful” about the LNG industry’s claims that LNG exports could play a key role in the government’s goals of lowering greenhouse gas emissions by 30% below 2005 levels by 2030 on its way to reducing emissions to zero by 2050.
He said the belief that LNG could displace coal-fired electricity in China and yield a net benefit for Canada would be “unlikely to happen in the very short term.”
Wilkinson said ongoing global negotiations are attempting to write accounting rules that ensure transparency, environmental integrity and no double counting of emissions.
Environmental economists doubt that any country or company would both pay for LNG and also forgo the credits associated with those transactions.
Troubling comments Wilkinson’s comments troubled Alberta Premier Jason Kenney and Tim McMillan, president of the Canadian Association of Petroleum Producers, who questioned why the minister was apparently ready to voluntarily present a watered down version of their claims to collecting all or part of the GHG credits linked to LNG exports.
Kenney called on the government to reconsider its position before allowing Wilkinson to “surrender Canada’s interest,” adding he was “disappointed” by what he has heard from the minister.
McMillan said Wilkinson’s comments were “a bit frustrating” by indicating he had no intention to make a case for Canadian LNG exports.
He said that without “making dramatic policy decisions” investment in Canada’s LNG development could be hampered.
Chevron considering selling In the thick of the Madrid negotiations, the outlook for Canada took a setback when Chevron said it was considering putting its 50% stake on Kitimat LNG on the block.
“Although (Kitimat) is a globally competitive LNG project, the strength of Chevron’s global portfolio of investment opportunities is such that Kitimat LNG will not be funded by Chevron and may be of higher value to another company,” the company said in a statement.
Chevron said it would continue to work closely with its Australian partner Woodside Petroleum and First Nations partners during the search for a buyer.
Jeremy McCrea, a Raymond James analyst, said it would have been nice to see Kitimat LNG come on stream shortly after LNG Canada, but Chevron’s comments “may be tempering this type of enthusiasm.
“To see them potentially take a writedown of their gas reserves (by about US$11 billion) and make the comments they did is a bit of a reversal from what we’ve been seeing from them,” he said, adding that Chevron may be “taking a pause” given the outlook for global LNG prices.
McCrea there were no obvious buyers for the Chevron stake, although Rockies LNG, a consortium of British Columbia and Alberta gas producers, has been exploring the prospect of building a project.
- GARY PARK
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