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Chevron has LNG laundry list for ‘economics-driven’ Kitimat
Finding a new partner to replace Apache, securing sales contracts, agreement with First Nations and certainty in fiscal arrangements with the British Columbia government top the list of issues to be resolved before Chevron will sanction its Kitimat LNG project, Chevron Corp’s Chief Executive Officer John Watson said.
“This is not a schedule-driven project, it’s an economics-driven project,” he told reporters in Calgary on Sept. 12.
When Apache announced its departure this summer, Chevron was quick to put out word that it has no interest in adding that 50 percent to its stake, with Watson underscoring that position.
“Obviously, we need to get the ownership sorted out before we can move the project forward in a significant way,” he said, without disclosing whether any candidates have surfaced beyond commenting that “there is interest, although what form that interest takes in terms of the type of partner remains to be seen.”
“There’s a great deal of effort that’s required and you have to have good alignment amongst partners as well,” he said. “We’ll move the project forward when we have those things in place.”
Kitimat most advanced Of the 17 LNG projects on the table for British Columbia, Kitimat is the most advanced, but competing proposals by Shell, Malaysia’s Petronas and the ExxonMobil/Imperial Oil partnership are strongly placed to line up Asian buyers.
Watson did say agreements have been reached with 15 of 16 First Nations along the pipeline right of way from northeastern British Columbia’s gas fields to the liquefaction and tanker terminal at Kitimat, while work continues on site plans and clearing a path for the pipeline.
The pipeline connections include a 280-mile section by Pacific Trails to carry 1 billion cubic feet per day of gas feedstock from the Horn River and Liard basins.
But that has suddenly developed a sinister element, with security cameras capturing two disguised men wrapping gas pumps at Chevron stations in Vancouver with chains and bike locks.
A computerized voice on a video posted in August warns that the action to shut down four stations will be followed by more “if Chevron continues to push through” the pipeline without the consent of the Unist’ot’en, a branch of the Wet’suwet’en First Nation, which evicted surveyors from their territory near Kitimat in 2012.
Chevron said it would not speculate on the reasons why the actions have been taken, but has previously emphasized that most of the work so far on the C$1 billion pipeline has been awarded to First Nations businesses.
Global pressure, demand Looking at the larger LNG outlook, Watson said there is global pressure on LNG projects, noting that those making headway in North America are on the U.S. Gulf Coast where the infrastructure is in place.
But he said it is also clear that there is a worldwide demand for energy which could grow by 2 percent annually over the next 20 years, much of which will involve natural gas as an alternative fuel to coal and nuclear power.
“The purchasers are anxious to have supplies from reliable locations such as Western Canada,” because of its relatively close proximity to Asia, Watson said, while adding “there does need to be a meeting of the minds when it comes to (the price for LNG) to underpin the economics in a world where costs have risen.”
Although British Columbia’s LNG terminal locations are remote, and the cost of transporting natural gas from British Columbia and Alberta are significant, he said LNG projects in Australia and Africa face considerable cost pressures as well.
- Gary Park
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