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LNG takes another blow in BC as Kitimat project looks for buyers
Gary Park for Petroleum News
The once head-spinning pioneering days of LNG development in British Columbia, when former Premier Christy Clark touted as many as 20 projects and predicted three large scale ventures would be onstream by 2020, have turned into a head numbing experience.
Virtually all of the proposed schemes carrying combined investments of well over C$100 billion have disappeared almost as fast as they surfaced.
That leaves the C$40 billion Shell-led LNG Canada, which has four Asian partners, and is moving ahead with construction of its terminal, while a TC Energy pipeline from northeastern British Columbia gas fields is proceeding. The anticipated startup date is 2025.
Otherwise, the only apparent survivor is the C$1.6 billion electric-powered Woodfibre LNG project which is expected to make a final investment decision this fall, buoyed by its recent sales agreement with BOP.
A handful of other players with plans in the tentative stages have yet to declare their intentions.
Kitimat LNG The scrapheap has just been expanded as the Chevron-Woodside joint venture for the C$32 billion Kitimat LNG has folded after several years of shuffling the partners and stalling on a final investment decision.
In April, Chevron said it would stop funding feasibility work on the project. That decision came 18 months after putting its assets up for sale and writing off C$2.2 billion as an asset impairment.
On May 18, Australia’s Woodside announced plans to divest its 50% of the project. It had already made a $720 million write down in 2019.
There are no obvious candidates to make offers in the wake of an exodus from British Columbia’s LNG sector that has included Malaysia’s Petronas and ExxonMobil, two global LNG players who have been discouraged by long and contentious regulatory processes and heated opposition from environmentalists and some First Nations.
Key gas producers such as Encana (now Ovintiv), EOG Resources and Apache have also bailed out as lead players in LNG development.
Keeping Liard Basin assets Woodside Chief Operations Officer Meg O’Neill said her company would retain its Liard Basin gas assets, straddling the British Columbia-Alberta border, the planned source of feedstock for Kitimat LNG.
She said the upstream position in the basin would give Woodside a “low-cost option to investigate potential future natural gas, ammonia and hydrogen opportunities in British Columbia.”
O’Neill said Woodside had hoped to develop new LNG supplies for Asian markets later this decade but has decided instead to refocus funds on “opportunities that will deliver nearer-term shareholder value.”
David Austin, an attorney who concentrates on the energy sector, told Global News the Kitimat LNG announcement is a “big deal … there aren’t many active players left on the development side of the LNG industry in British Columbia.”
He said Kitimat LNG may be a casualty of advances in the renewable energy sector and the development of larger batteries to store the electricity they produce.
“Potential purchasers of LNG don’t want to commit to long-term contracts,” especially as the cost of renewable generated electricity such as wind and power has dropped by 80% to 90% over the last decade, Austin said.
The setback to Kitimat LNG has upset a First Nations partnership representing 16 aboriginal communities in northern British Columbia.
Mark Podlasly, chair of the partnership, said his group “stands ready to support the right buyers who will treat us as a genuine partner and recognize the unique value that we can bring to the table.”
- GARY PARK
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