LNG

US major ConocoPhillips has agreed to acquire additional acreage in the Montney Shale in northeast British Columbia held by Kelt Exploration (LNG) Ltd. of Calgary for C$510 million (US$380M) in cash, giving a current valuation in a prolific oil and natural gas area that was once a centre of multiple plans for LNG exports.

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.

Chevron Corp., a leading liquefied natural gas operator in Australia, said it was downgrading investment plans for other ventures such as the Kitimat LNG project in Western Canada, its US Appalachia shale activities in the US Northeast and some overseas projects.

Australian liquefied natural gas project stakeholder Santos, whose most recent acquisition was the Darwin LNG plant in the Northern Territory from ConocoPhillips, has appointed former Apache Corp. senior executive Janine J. McArdle to the Santos Board.

US major Chevron Corp. is continuing to progress with its revived Canadian Kitimat liquefied natural gas export project originally proposed with Apache Corp. for Bish Cove in British Columbia.

The British Columbia Oil and Gas Commission has just highlighted the massive volumes of shale gas reserves to underpin LNG export projects in the Canadian province with the Montney Shale alone having 1,965 trillion cubic feet of gas-in-place unconventional resources.

The LNG Canada project led by Royal Dutch Shell will initially produce 14 million tonnes per annum of LNG and has an option to increase its capacity to 28 MTPA.

The Shell project includes a US$5-billion pipeline of 670 kilometres being developed by TransCanada Corp. to bring the feed-gas from the Montney in northeast BC to the Pacific Coast.

Feed-gas for Chevron’s Kitimat 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, also in northeast BC.

Chevron will then transport the gas on the proposed Pacific Trail Pipeline to the liquefaction plant site at Bish Cove, also near Kitimat.

While the BC Commission put the Montney Shale resources in place at around 1,965 Tcf, for the project being developed by Chevron in partnership with Woodside of Australia will use some of the Liard Shale’s 848 Tcf and the Horn River Shale’s 448 Tcf.

The northern natural gas basins account for nine of 10 new wells in the province and currently account for 4.9 billion cubic feet per day, or 77 percent, of BC's output.

“The 42 Tcf of Montney gas booked as market-ready reserves since horizontal drilling and hydraulic fracturing arrived to enable development in 2005 are only 2 percent of the resources, “ said the Commission in its 40-page report.

In the last five years natural gas production has increased by 23 percent resulting in increased loads within the existing pipeline delivery points for the Montney, Horn River and Liard basins.

Most of the gas within these regions is transported by pipelines by Enbridge and TransCanada.

“In 2005, the onset of Montney horizontal drilling with hydraulic stimulation created a new supply of gas. This was followed by Horn River development in 2010. Further development of the Horn River basin has now ceased, awaiting economic gas demand,” stated the Commission.

Chevron has recently revived its almost dormant LNG project originally proposed with Apache Corp. for Bish Cove near Kitimat by applying to regulators for export capacity of up to 18 MTPA.

The prolific Montney formation covers 130,000 square kilometres at various depths of BC and the neighbouring province of Alberta.

The provinces split the geology evenly by area, but BC has about 60 percent of the gas estimated to figure in the Montney marketable reserve forecast, or 271 Tcf of the formation’s total 449 Tcf of marketable gas.

The Commission listed the leading BC Montney shale developers and they include participants in the LNG Canada project, Shell and Petronas of Malaysia.

Other asset holders are Encana Corp., ARC Resources, Tourmaline Oil, Painted Pony Energy, Murphy Oil Corp., Canadian Natural Resources Ltd., Canbriam Energy and Crew Energy.

Shell and its Asian partners, also including PetroChina, Japan's Mitsubishi and Korea Gas Corp. have started work at the brownfield site near Kitimat, a former energy products terminal acquired by Shell in 2011 when the delayed Chevron project had already cleared its Bish Cove site to be ready for construction.

Chevron Corp., the second-largest US oil and gas company and a leading participant in the LNG market with two plants in Western Australia, has agreed a $50 billion deal to buy US energy company Anadarko Petroleum, one of America’s leading independent producers and a key stakeholder in Mozambique LNG assets.

Chevron Corp. has revived its almost dormant Canadian Kitimat liquefied national gas project originally proposed with Apache Corp. for Bish Cove in British Canada by applying to regulators for export capacity of up to 18 million tonnes per annum.

Chevron, the operator of two LNG export plants in Western Australia, now has Australian company Woodside Petroleum as its partner after Woodside purchased assets from Apache in 2014, including stakes in Wheatstone LNG in Australia and the Kitimat venture in BC.

“Chevron and Woodside have applied for a new licence for their Kitimat LNG plant in northern British Columbia that could see it nearly double in size,” said Chevron.

The companies have submitted the application to Canada’s National Energy Board with a revised plant design that may include up to three LNG processing Trains instead of two.

“Chevron and Woodside have re-evaluated the originally proposed two-Train, 10 MPTA LNG plant development concept, with a focus on improving Kitimat LNG cost of supply competitiveness relative to other global LNG projects,” Chevron said in a statement.

The re-launching of the Bish Cove project follows a final investment decision made in October 2018 by the Royal Dutch Shell-led LNG Canada joint venture.

Both plant sites are almost adjacent and are located about 650 kilometres north of the province’s largest city, Vancouver.

Shell and its Asian partners, including PetroChina, Petronas of Malaysia, Japan's Mitsubishi and Korea Gas corp. have started work at the brownfield site, also near Kitimat, and which had been an energy products terminal before being acquired by Shell in 2011 when the Chevron project was already progressing nearby.

The Shell project includes a US$5-billion pipeline of 670 kilometres being developed by TransCanada Corp. to bring the feed-gas from the Montney shale basin in northeast BC to the Pacific Coast.

Shell will initially produce 14 MTPA of LNG and has an option to increase its capacity to 28 MTPA.

Feed-gas for Chevron’s Kitimat 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.

Chevron will then transport the gas on the proposed Pacific Trail Pipeline to the site at Bish Cove.

The US major noted that its Kitimat LNG project was the most mature of the proposed Canadian LNG ventures and it also has an established partnership with the Haisla First Nation who live in the Kitimat area.

“We have key federal and provincial environmental approvals and licenses in place and substantial early work on the LNG site and pipeline route is underway,” said Chevron.

Chevron has a 50-50 partnership with Woodside in the Kitimat venture, though they have yet to disclosed cost estimates or investment and construction schedules.

The Kitimat joint venture said in March 2018 that it had been drilling some appraisal wells in the Liard Basin, though there has been little progress over several years on the plant development front.

However, some environmental and LNG export permits and First Nations benefits agreements are still in place for the liquefaction plant.