By RUSSELL GOLD
Chevron is buying into two massive shale-gas fields in western
Canada and a facility to ship that gas to Asian buyers, as the
efforts to export North America's massive natural-gas resources
A Canadian subsidiary of Chevron is buying out
two companies involved in the projects, EnCana Corp. and EOG
Resources, and will become in equal partner with Apache Corp.,
the companies said Monday.
The companies did not disclose how much
Chevron is paying for stakes in the planned liquefied natural
gas export terminal and about 650,000 acres in two massive
shale gas discoveries in northern British Columbia. But
analysis by The Wall Street Journal suggests a
purchase price of about $1.3 billion. Chevron declined to
comment on the figure.
In recent years, energy companies have
discovered so much gas in North America's shale rocks they have
created a glut that sent prices for the fuel tumbling. So
companies have been racing to try to export liquefied natural
gas; LNG is created by cooling natural gas to 260 degrees below
zero Fahrenheit, at which point it turns into a compact liquid
and can be shipped around the world on giant tankers.
Meanwhile, demand in Asia for gas has soared
and buyers there, including large power- generation customers,
routinely pay several times more for gas than users in the
The Canadian project "is ideally situated to meet
rapidly growing demand for reliable, secure, and
cleaner-burning fuels in Asia, which are projected to
approximately double from current levels by 2025," George
Kirkland, vice chairman of Chevron, said in a statement.
Apache and its two initial partners, EOG and
EnCana, announced plans two years ago to build a $3 billion
export terminal in Kitimat, British Columbia, but the project has run into strong
competition. The United States is weighing allowing LNG export
from the Gulf Coast and Alaska, and Canada is moving ahead with
LNG exports from British Columbia.
Earlier this year, Royal Dutch Shell announced
a competing LNG project, also in Kitimat, and quickly lined up
financing from Asian gas buyers. The Apache project had secured
a government export license, but struggled to find buyers for
Chevron's participation could resolve this
problem. The California-based energy company has extensive
experience building LNG terminals and marketing the
super-cooled fuel to Asia. It has two large LNG projects in the
works in Australia and contacts with large Chinese, Japanese
and South Korean purchasers.
G. Steven Farris, chairman and chief executive
of Apache, said Chevron's involvement "gives tremendous
credibility to buyers" and will make it easier to sell the
In addition, the costs of the project mean
Apache needs to bring in a big, global company like Chevron, he
"The only private outfits that can develop
these, with the amount of money needed, are major oil
companies," he said, though he would not say when construction on the plant would
Apache, a Houston-based company that has more
global operations than many North American-focused shale
operators, has the financial resources to remain in what will
be a project that will take years to
develop, he said, adding, "I think this has a tremendous
long-term value potential."
EOG and EnCana both held a 30% stake in the
Kitimat terminal, a pipeline to move gas from remote areas in
British Columbia and 100,000 acres in the Horn River gas
discovery. Both will sell these assets to Chevron and Apache,
which already owned a 40% stake and will invest enough to
increase its share to 50%.
Both EOG and EnCana said the sales will allow
them to focus on their core energy-producing businesses.
In addition, Chevron is buying a 50% stake in
535,000 acres Apache has leased in the Liard Basin gas
discovery, also in British Columbia, and in Horn River. Apache
will net about $400 million after the various transactions
After closings of the deals, which are subject
to regulatory review and are expected in the first quarter of
2013, Chevron and Apache will have equal stakes in the
terminal, pipeline and gas finds. Chevron will operate the
pipeline, LNG terminal and market the gas to Asian buyers.
Apache will operate the gas drilling program.
Although not all of the financial details were
released by the companies, enough were disclosed to determine
approximate values that Chevron had assigned to both the LNG
terminal and gas discoveries. The Wall Street Journal
used these disclosures to develop an estimate of how much
Chevron was spending.
Dow Jones Newswires