A stalled project in Bish Cove in Kitimat, British Columbia on Oct. 7, 2018.Amber Bracken/The Globe and Mail
Australia’s Woodside Petroleum Ltd. is seeking to unload its 50-per-cent stake in Kitimat LNG, two months after co-owner Chevron Corp. decided to halt funding for the liquefied natural gas project in northern British Columbia.
Meg O’Neill, acting chief executive officer of Woodside, said the company will instead focus on the Scarborough LNG project in Australia and the Sangomar offshore oil project near Senegal.
“The Kitimat LNG proposal was designed to develop a new source of LNG to supply Asian markets in the latter part of this decade,” Ms. O’Neill said in a statement on Tuesday from Perth. “However, we have decided to prioritize the allocation of capital to opportunities that will deliver nearer-term shareholder value.”
In mid-March, California-based Chevron opted to stop funding for the joint venture after no buyers surfaced for its stake in the much-delayed project. Chevron placed its 50-per-cent interest in Kitimat LNG for sale in December, 2019.
Woodside’s exit strategy marks the end of its B.C. LNG dreams. Three years ago, the company axed plans to build its own LNG project at Grassy Point, located near Prince Rupert, B.C.
Kitimat LNG’s proposed Pacific Trail Pipeline sought to transport natural gas from the Summit Lake area in the B.C. Interior to the West Coast terminal site at Bish Cove, located on Haisla Nation reserve land near Kitimat, B.C.
Woodside has now joined Chevron in the tough task of trying to sell to deep-pocketed buyers, who would need to spend billions of dollars to construct the LNG project and build the 480-kilometre pipeline. If no buyers emerge, the project will be mothballed indefinitely.
Woodside said it will retain its position in properties for natural gas drilling in northeast B.C. shale plays co-owned with Chevron in the Liard Basin. “Retaining an upstream position in the prolific Liard Basin provides Woodside a low-cost option to investigate potential future natural gas, ammonia and hydrogen opportunities in British Columbia,” Ms. O’Neill said.
Chevron and Woodside previously disclosed a total of US$2.32-billion in writedowns related to asset devaluations from their investments in the Bish Cove joint venture.
The site preparation at Bish Cove and other work, including constructing a new road along difficult terrain near Douglas Channel, turned out to be much more costly and complicated than originally anticipated.
In February, 2020, Chevron booked a non-cash, after-tax impairment charge of US$1.6-billion while Woodside wrote down US$720-million. On Tuesday, Woodside said costs associated with exiting Kitimat LNG would result in a hit of US$40-million to US$60-million to its net profit after tax.
Chevron bought its stake in Kitimat LNG in 2013 from Encana Corp. and EOG Resources Inc., while Woodside acquired its interest in 2015 from Apache Corp.
In mid-2019, as Kitimat LNG’s operator, Chevron submitted a revised plan to B.C. and federal regulators, aiming to start terminal construction in 2023. The plan called for electric-motor-driven technology to supercool natural gas into liquid form.
In 2014, there were more than 20 proposals in B.C. to ship LNG in tankers to markets overseas. Despite much hype seven years ago, only the Royal Dutch Shell PLC-led LNG Canada consortium is currently constructing a terminal to export the fuel to Asia.
LNG Canada hopes to begin exports in 2025 from its $18-billion terminal, located on an industrial site on the Haisla’s traditional territory in Kitimat. Work has been continuing on the TC Energy Corp.-operated Coastal GasLink pipeline, which will transport natural gas from northeast B.C. to LNG Canada’s terminal site.
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Brent Jang