Woodside Petroleum, the Australian operator of two liquefied natural gas plants, said its next earnings statement would recognise a non-cash impairment of $720 million in relation to the Kitimat LNG project and assets in the Canadian Pacific province of British Columbia.
The earnings will be released on February 13 by the company based in Perth, Western Australia. Woodside is operator of the Australian North West Shelf plant and Pluto LNG.
“Kitimat remains a world-class project and Woodside will continue to evaluate actively future development opportunities, including optimisation of gas supply into processing facilities,” said the Australian company.
“However, the impairment reflects increased uncertainty, particularly in the timing of the development of the upstream Liard resource, following sustained depressed gas market conditions in Western Canada,” it added.
Woodside became a shareholder in the Kitimat project in BC after buying a stake from US company Apache Corp. and joining lead developer and operator Chevron Corp. as a shareholder.
However, Woodside Chief Executive Peter Coleman said in 2019 that his company would be willing to reduce its current stake of 50 percent.
Chevron holds the other 50 percent stake in Kitimat LNG and the operatorship of the associated feed-gas reserves.
Coleman said at the time that Woodside did not like holding such a large share in any project when it was not the operator.
He explained that from a capital management and risk management point of view we would rather hold less equity.
The CEO said that in a major project where you are operating, you would like your stake to be between 40 percent and 60 percent equity.
When you’re a non-operator, anywhere between 20 percent and 40 percent is the right number.
Chevron and Woodside have cooperated for the Kitimat project with the Haisla First Nation on whose traditional land the project at Bish Cove would be constructed.
Feed-gas for the Kitimat liquefaction plant will come from the large upstream shale-gas resources in the 322,000 net acres it has in the Horn River and Liard Basins of northeast BC.
Another nearby project is the Royal Dutch Shell-led LNG Canada joint venture.
Both project sites are almost adjacent and are located about 650 kilometres north of the province’s largest city, Vancouver.