Could Chevron Jumpstart a North American Natural Gas Sector?

Could Chevron Jumpstart a North American Natural Gas Sector?

The healthy gas zone finished a year on a high note following a proclamation that one of a world’s streamer energy firms has concluded to work — and buy a prejudiced seductiveness in — a due liquefied healthy gas (LNG) plan on Canada’s British Columbia coast.

Kitimat LNG’s plan changed a step closer to existence final week when Chevron (NYSE:CVX) announced that it will buy out a minority positions that Encana (TSX:ECA,NYSE:ECA) and EOG Resources (NYSE:EOG) reason in a endeavor. In doing so, Chevron has determined itself as a 50-percent owners in a plan that is prepared for construction, though has depressed plant to a series of delays amid doubt surrounding sales contracts.

Chevron also reliable that it will take a 50-percent seductiveness in approximately 644,000 acres of petroleum and healthy gas rights in a Horn River and Liard Basins in British Columbia. Chevron and Apache (NYSE:APA) will now share tenure of a project, with Chevron handling a plant and associated Pacific Trail Pipeline, that is set to ride oil from Northeastern BC.

In Oct 2011, a National Energy Board granted Kitimat LNG a 20-year trade permit to offer general markets. The due plan is now in a front-end engineering and pattern phase; during a initial proviso it will be means to trade 1.4 billion cubic feet (bcf) per day, or 5 million tons of LNG per year, a series that is approaching to double in a future, according to a Calgary Herald.

Apache formerly led a project, though never sealed an offtake agreement to sell LNG to Asian buyers, an article in The Globe and Mail states. The association creatively approaching to make a final investment preference progressing in 2012; however, though guaranteed sales agreements, a preference to pierce a plan brazen valid impossible.

Investor concerns eased

Chevron’s impasse in a plan will approaching palliate LNG investors’ concerns about a endeavor. The LNG attention is routinely operated on extensive contracts, and buyers are mostly some-more gentle traffic with vast industrial players (such as Chevron) that boast a proven lane record of delivering product on time.

On that note, Apache settled that Chevron’s impasse is a large boost for a project, giving a clarity that construction is now approaching a foregone conclusion. In a press release, G. Steven Farris, Apache’s authority and CEO said, “Kitimat LNG is a initial inciter among British Columbia LNG projects, and we design a movement of this plan will accelerate with this new corner venture.”

“With Chevron in a project, a Kitimat plan is unequivocally some-more of a when tender rather than an if,” combined Bob Dye, Apache’s comparison clamp boss of tellurian communications, in comments to The Globe and Mail. “They pierce financial strength, handling knowledge and selling imagination to a project.”

LNG exports driven by abroad markets

The pull for Canadian LNG exports is being driven mostly by a enterprise to broach appetite abroad — quite in Asia, where gas trades for 3 to 5 times a values available in North America. Gas prices have plummeted on a behind of sepulchral reserve as a outcome of increasingly fit descent methods and large-scale pot unclosed in shale plays.

The Chevron-Apache kinship is not a initial between a firms. The dual parties are already partners in Wheatstone LNG, an Australian plan that is underneath construction and is approaching to trade 8.9 million tonnes of LNG a year.

While a Kitimat plan is a farthest along in terms of receiving regulatory capitulation and engineering work, some marketplace observers had begun to doubt a brew of owners involved. There was a clarity that intensity business saw Encana and EOG as upstream independents who did not have a required knowledge to pierce a plan forward.

Those assumptions seem to have been fit by a fact that both Encana and EOG remarkable that they sole their stakes in a plan to concentration on “core” operations. Encana, for one, says it stays committed to healthy gas trade development.

“This investment by Chevron, a multinational LNG player, represents a pivotal step in a growth of LNG trade from Western Canada,” said Randy Eresman, Encana’s boss and CEO. “Our categorical idea given we initial acquired an seductiveness in Kitimat LNG roughly dual years ago was to assistance safeguard a course of this plan towards a development. While we are no longer a approach member in this project, we continue to support LNG trade as critical to diversifying markets for North American healthy gas.”

Rich Coleman, BC’s apportion of appetite and mines, confirmed this sentiment, revelation The Globe and Mail that he is “pretty happy” with Chevron’s pierce and a revitalizing outcome it could have on a province.

“If you’re going to attract this turn of activity, we need to attract an general turn of investment, since these things cost a lot of money,” he said. “Once you’re in a game, you’re in a diversion severely for a integrate of generations. And that’s unequivocally critical to B.C., given how most healthy gas we have.”

First Nations to be consulted

Chevron’s intent was highlighted when it immediately confirmed that it will work with First Nations in a northwest to assistance a due trickery pierce forward. The accommodating pierce seems to be a response to ongoing open forums and a really open war of words between Enbridge and First Nations groups that distortion along a due Northern Gateway tube route.

Chevron’s comparison outmost communications advisor, Lief Sollid, pronounced a association skeleton on talking with First Nation groups to send how a plan would advantage their communities. He also settled that Chevron’s knowledge in a tellurian LNG marketplace will assistance allege a scheme, according to a CFTK-TV report.

“We have poignant knowledge in building LNG comforts and in selling a gas and building prolonged tenure relations with clients. So we pierce that knowledge to a Kitimat LNG plan and we positively trust we can assistance pierce it forward.”

Encana and EOG have not disclosed a values of their tools of a deal, though Apache pronounced it netted $400 million from Chevron.


Securities Disclosure: I, Adam Currie, reason no approach investment seductiveness in any association mentioned in this article.

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2 thoughts on “Could Chevron Jumpstart a North American Natural Gas Sector?

  1. With the amount of Nat Gas we have, it would be almost feasible to build a pipeline to China and pump it there 24/7.
    It would be good for the deficit as the money would could be used as a way to pay down our debt to China.
    It would be good for the environment, as it would help to dispace the vast coal powered plants of China that will be the main increase in world carbon emmisions for the next several decades.
    While Coal is the dirtiest fuel on earth, the emissions of Nat Gas is 2/3 water.
    China could help pay for it as they have more money that God.

  2. Adam...can you include your favored price point on nat gas stocks and list them ..lng nad nrg are my favorites..and etf boil and ung....and begin to include this along with oil and gold and silver in the broadcasts...thanks!!!!...alos solar and wind are taking the market ...fslr, stp, spwr tsl ldk jaso .so beaten are now gainig attention and coming up in the trend triangles...please address in the next broadcasts....TX Happy New year...i did buy sprw at very happy today and considering fslr on a dip for very long term...maybe other to trade in and out od on dips....

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