LNG

Woodside Petroleum, the operator of the North West Shelf LNG plant in Western Australia, has emerges as the front-runner to acquire the 16.67 percent stake in the NWS facility to be sold by US major Chevron Corp. as part of its overhaul in the depressed market.

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.

Woodside Petroleum, a shareholder in the Kitimat LNG export project in the Canadian province of British Columbia with US major Chevron Corp., said at a conference in Abu Dhabi that the Perth, Australia-based company would be interested in selling part of its Kitimat stake to a third party.

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.