Page 5 - NorthAmOil Week 49
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NorthAmOil COMMENTARY NorthAmOil
Chevron has previously stated that the increase in Kitimat LNG’s scope is designed to improve the project’s “cost of supply com- petitiveness” compared with other LNG pro- jects globally. This comes as the LNG market is increasingly facing short-term oversupply, mak- ing it more difficult to green-light new projects because buyers are more hesitant to commit to new long-term offtake agreements when car- goes are readily available on the spot market. As a result, some major players are proceeding with new LNG developments without significant offtake deals in place, also hoping to benefit from sales on the spot market. Such players need to have sufficient financing at their disposal, but will still look for ways to bring construction costs down, given that these can run into tens of bil- lions of dollars for LNG megaprojects.
Chevron’s application envisions commis- sioning of the Kitimat LNG facility by 2029. The company has not yet set out a timeline for an FID on the project, but analysts are speculating that it could come relatively soon. The facility would be located around 20km from the Royal Dutch Shell-led LNG Canada terminal, which is cur- rently under construction after reaching FID last year. If Chevron makes its own FID before Shell’s terminal is built and proceeds to construc- tion, the former could benefit from skilled trades brought to the area by work on LNG Canada.
What next?
Kitimat LNG may also bring another partner on board. Currently, Chevron operates the project
in a 50:50 partnership with Australia-based Woodside Energy. In September, Woodside’s managing director and CEO, Peter Coleman, told Reuters that his company was interested in offloading part of its stake.
The news was welcomed by analysts at the time as a sign that the project was progressing, and the CER’s approval of a longer, larger export licence marks another step on the path towards FID.
There has been speculation that state-owned energy companies in Asia or the Middle East could emerge as potential buyers for a portion of Woodside’s stake in Kitimat LNG. A Raymond James analyst, Jeremy McCrea, said in Septem- ber that the Kuwait Foreign Petroleum Explo- ration Co. (KUFPEC) could emerge as a likely buyer given that it already partners Chevron on an upstream gas project in the Duvernay shale.
Meanwhile, gas producer Painted Pony Ener- gy’s CEO, Pat Ward, said that Malaysia’s Petronas appears to be a likely candidate. The Malaysian company scrapped its own planned LNG export terminal in BC, Pacific NorthWest LNG, in 2017, and subsequently bought a minority stake in LNG Canada.
No further news of a new partner has emerged since September. Chevron’s Sollid told the Financial Post at the time that the partners in the plant continued to engage with “poten- tial LNG buyers and other parties interested in the Kitimat LNG project”. The CER’s licence approval could add momentum to any talks that are currently underway.
Chevron’s application envisions commissioning of the Kitimat LNG facility by 2029.
Week 49 11•December•2019 w w w . N E W S B A S E . c o m
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