This Monday, Australia’s Woodside Petroleum announced it decided to exit its 50% non-operated interest in the proposed Kitimat liquefied natural gas (LNG) export project in Canada. Therefore, Chevron is having a hard time finding a buyer for its operated development, for which it divested its 50% share in December 2019.
Read more of our news content, here: TGS diversifies through CO2 Storage Advanced Seismic Reservoir Monitoring
About the Kitimat LNG Project
The proposed $21M Kitimat LNG development in Canada’s British Columbia includes a massive 480 km Pacific Trail Pipeline. According to some experts, this situation makes the scheme much less competitive than the proposed Cedar LNG export project planned nearby in Kitimat. In fact, Cedar LNG, a smaller, more economic proposal, only requires an eight km pipeline.
Moreover, analysts said that by targeting low-cost supplies from the liquids-rich Montney Shale; the Cedar LNG project would avoid the expenses associated with Kitimat LNG. Besides, Cedar will be able to better-overcome reliance on dry gas from the Horn River and Liard basin formations.
Therefore, Chevron still has yet to find buyers for Kitimat, but the process has proved unsuccessful. As a result, in March this year, Chevron said it was halting all spending on the project. Then, Chevron called this withdrawal part of a “global portfolio optimization effort focused on improving returns and driving value.”
Why is Woodside leaving?
On the other hand, Woodside said its exit would include the divestment and restoration of assets, leases; and agreements covering the 480 km Pacific Trail Pipeline route and the site for the proposed LNG facility. However, the Australian company will still retain a position in the Liard basin upstream gas resource.
Accordingly, Woodside acting chief executive Meg O’Neill commented; “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.”
Additionally, regarding the withdrawals’ costs, Woodside expects them to impact its 2021 net profit after tax (NPAT) by approximately US$40-60 million.
In February 2020, Woodside booked an impairment charge of $720M after-tax on its Kitimat stake. At the time, the company said it was confident about the long-term prospects of Kitimat. For instance, Kitimat acquired a license from Canadian authorities in 2019 to increase export to $21MN T/yr for 40 years.