Chevron Corporation (NYSE:CVX) announced that Chevron Canada Limited, its indirect subsidiary agreed to purchase 50 percent operating stake in Kitimat liquefied natural gas (LNG) project and the proposed Pacific Trail Pipeline (PTP) in Canada.
The company will take over the interests of EnCana Corporation (NYSE:ECA) and EOG Resources, Inc. (NYSE:EOG) in both facilities.
In addition, Chevron Corporation (NYSE:CVX)’s indirect subsidiary in Canada will also acquire 5o percent stake of the 644,000 acres of petroleum and natural gas rights located in the Horn River and Liard Basins in British Columbia, Canada.
Chevron Canada Limited will have an equal control of the Kitimat LNG Project and PTP along with the subsidiary of Apache Corporation (NYSE:APA), which owns 50 percent stake in both facilities.
According to the second largest oil producer in the United States, the operatorship in Kitimat LNG Project and PTP will be transferred to Chevron Canada Limited.
In a statement, George Kirkland, vice chairman of Chevron Corporation (NYSE:CVX) said, “The Kitimat LNG development is an attractive opportunity that is aligned with existing strategies and will drive additional long-term production growth and shareholder returns.”
According to Kirkland, Chevron’s investments in the Kitimat LNG project would expand its LNG portfolio globally and build upon the company’s LNG construction, operations and marketing capabilities. In addition, he believed the investment would help the company meet its growing demand for reliable, secure, and cleaner-burning fuels in Asia. The demand for fuels in Asia is projected to double its current levels by 2025.
The Kitimat LNG Project obtained a license from the Canadian National Energy Board to export 10 million tons of LNG per year. The project is currently under the Front-End Engineering Design (FEED) phase.
“This investment by Chevron Canada Limited captures significant resource and acreage in proven and emerging natural gas basins in Canada, and is a key opportunity to expand our overall North America exploration and production portfolio. It will enable our North America operations to play an increasingly important role in Chevron’s global growth,” said Gary Luquette, president, Chevron North America Exploration and Production.
On the other hand, Apache expects to gain $400 million from the transaction. The company agreed to sell 50 percent stake or approximately 212,000 net acres in the Liard Basin for $500 million.
Analysts at Raymond James note:
In a broader sense, Chevron’s entry into this project marks the company’s first-ever foray into the realm of North American LNG exports (in contrast to Australian and other overseas LNG developments, where Chevron has long been a top player). In fact, as shown in the table on page 2, few of the top-tier global operators have thus far taken an active role in these early-stage projects. Exxon and Shell are each in one project consortium, but the timelines for their projects are much hazier than Kitimat’s.