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NorthAmOil COMMENTARY NorthAmOil
terminals in North America and elsewhere are under development, threatening to exacerbate the situation.
Meanwhile, the falling costs of renewables mean that there are increasingly more options – at least for power generation – that could mod- erate gas demand growth in the longer run, espe- cially as the energy transition becomes more of a priority.
“There is significant uncertainty as to the scale and durability of demand for imported LNG in developing markets around the world,” the International Energy Agency (IEA) said in a recent report. The agency added that given the high cost of processing and transporting LNG, “competition from other fuels and technologies, whether in the form of coal or renewables, looms large”.
Given how global gas and LNG trends are shaping up, it does not appear surprising that Chevron is seeking to pull back from its gas investments. Nonetheless, the super-major’s write-down and comments about Kitimat LNG did startle many given its efforts to advance the project.
“To see them potentially take the write-down on their gas reserves and make the comments they did is a bit of a reversal from what we’ve seen from them,” a Raymond James analyst, Jeremy McCrea, was reported by the Financial Post as saying. He added that the company might be “taking a pause” given the outlook for global LNG prices.
What next?
Kitimat LNG’s fate may have been thrown into doubt, but despite concerns over the longer-term viability of LNG investments, there is still a great deal of interest in the industry and a buyer may
yet emerge for Chevron’s stake in the project.
If a sale takes place, it would not be the first time the project has changed ownership, with Encana, EOG Resources and Apache having all previously owned stakes in the terminal before
selling out.
Meanwhile, Chevron’s 50:50 partner in Kit-
imat LNG, Australia’s Woodside Petroleum, said last week that it remained committed to the project. Woodside said it was still reviewing the implications of Chevron’s decision, but added that it would work with any new partner entering the joint venture.
“Kitimat LNG has significant advantages, including the potential to be the world’s clean- est LNG project using renewable power from the region’s abundant hydro sources, strong upstream supply options and proximity to grow- ing export markets in North Asia,” a Woodside spokesperson told Creamer Media’s Mining Weekly.
This comes despite the fact that Woodside had previously said it was considering selling a portion of its own stake in the project.
No obvious buyer has yet emerged for Chev- ron’s stake in the venture. Raymond James’ McCrea said “nobody comes to mind”, but added that groups such as Rockies LNG – a consortium of natural gas producers from British Columbia and Alberta – had been actively seeking LNG investments.
Woodside will be hoping that Kitimat LNG still appears competitive enough to attract a buyer for Chevron’s stake – and perhaps a por- tion of its own. And the emergence of a buyer is possible, but the process could take time, given that a worsening outlook for LNG will likely compel interested parties to proceed with more caution than before.™
A worsening outlook for LNG will likely compel interested parties to proceed with more caution than before.
Woodside will be hoping that Kitimat LNG still appears competitive enough to attract a buyer for Chevron’s stake.
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