Apache closes LNG deals

One transaction is seen as an easy fit for Woodside; the other poses challenges in untried territory for the Australian company.

On the heels of wrapping up the sale of its Wheatstone project in Australia to Woodside for US$2.8 billion, the Houston-based Apache also exited the Kitimat project in British Columbia by selling its 50 percent stake in the Chevron-operated venture for US$854 million.

The Kitimat assets come with Apache’s onshore shale gas properties in northeastern British Columbia’s Horn River and Liard basins, involving an estimated 15 trillion cubic feet of proved plus probable reserves.

When the deal was first announced, Woodside Chief Executive Officer Peter Coleman conceded that shale gas development “is not a core skill” for his company, but found comfort in Chevron’s experience as a “very competent unconventional” operator.

Still unresolved is the future of Woodside’s proposed Grassy Point LNG project in British Columbia, which has been based on a 2021 startup at 20 million metric tons a year, relying on third-party gas as feedstock.

That venture likely now hangs on the future of Kitimat, which is well advanced in the regulatory and permitting phases.

Sanford C. Bernstein & Co. has tagged Kitimat and the Shell-operated LNG Canada floated for British Columbia to achieve full commercial operation.

For Apache the LNG transactions, along with the sale of its upstream business in Australia, reflected the pressure it was under from activist investor Jana Partners and the corporate strategy to make the North America onshore its “primary growth engine.”

- Gary Park