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Chevron to make final Kitimat LNG decision in 2014


IRVING -- Chevron will make a final investment decision on the Kitimat LNG project in 2014, a company executive said Friday, putting a deadline on a project that has already seen delays.

The remark by George Kirkland, head of Chevron' s upstream business, comes as companies in the U.S. and Canada race to export the increasing amounts of natural gas being produced in North America. Recent advances in drilling techniques have unlocked huge amounts of natural gas from U.S. and Canadian shale formations, leading to a supply glut that has helped drive prices to among the lowest in the world and attracting customers from Europe and Asia.

Chevron bought a 50% stake in the Kitimat project in a deal completed in February, becoming an equal partner with Apache. Apache had originally planned to make a final decision in late 2011 or early 2012 whether to proceed with the project, which would ship liquefied natural gas from British Columbia, but later suspended that deadline because of the slow pace of finding customers.

Chevron is still trying to line up buyers for the natural gas it plans to export out of the facility it planned for the western Canada coast. The company won' t approve the project until it has lined up customers for at least 60% of Kitimat' s total 5 MMmt a year of export capacity, something it expects to happen in 2014, said Mr. Kirkland.

"We' ve have had some discussions with Asian buyers," Mr. Kirkland said during a call with investors. He declined to name the companies with which Chevron was negotiating. "It' s more likely to be a 2014 (decision), not late 2013," he said.

U.S. natural gas prices were $3.37/MMBtu Friday, down from $13.69 in July 2008. Cheniere Energy Partners and other U.S. LNG export projects have used the low price--based on the price benchmark set at the Henry Hub distribution facility --to attract customers.

Chevron won' t peg prices for the natural gas exported from Kitimat to the U.S. Henry Hub benchmark, Mr. Kirkland said. Instead, it will offer customers equity stakes in the Kitimat project, which Mr. Kirkland said should be more attractive to buyers.

"Henry Hub has variability--it can go up and down," he said. "We can get the same or a better situation for a buyer through their equity participation in the project."

Dow Jones Newswires

08/02/2013

 

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