By BEN LEFEBVRE
IRVING -- Chevron could make a final investment decision on
the Kitimat LNG
project in 2014, a company executive said, putting a timeline
on a project that has already seen delays.
The remark by George Kirkland, head of Chevron's upstream
business, comes as companies in the United States and Canada
race to export the increasing amounts of natural gas being
produced in North America. Recent advances in drilling
techniques have unlocked huge amounts of natural gas from
United States and Canadian shale formations, leading to a
supply glut that has helped drive prices to among the lowest in
the world and attracting customers from Europe and Asia.
Chevron bought a 50% stake in the Kitimat project in a deal
completed in February, becoming an equal partner with Apache.
Apache had originally planned to make a final decision in late
2011 or early 2012 whether to proceed with the project, which would ship liquefied
gas from British Columbia, but later suspended that
deadline because of slow progress in finding customers.
Chevron is still trying to line up buyers for the natural
gas it plans to export out of the facility it planned for
the western Canada coast. The company won't approve the project until it has lined up
customers for at least 60% of Kitimat's total 5 MMmt a year of
export capacity, something it expects to happen in 2014, said
"We've have had some discussions with Asian buyers," Mr.
Kirkland said during a call with investors. He declined to name
the companies with which Chevron was negotiating. "It's more
likely to be a 2014 (decision), not late 2013," he said.
Part of the problem is that buyers can shop around before
committing to contracts, said Fadel Gheit, analyst at
Oppenheimer & Co.
Exxon Mobil and BG Group have each announed plans for
export facilities in West Canada, while
other facilities are in different stages
of development throughout North America, Australia and Africa.
"Because of the supply growth in LNG, customers will be able to
drive hard bargains and suppliers must be competitive with
lower prices," Mr. Gheit said.
United States natural gas settled at $3.347 a million
British thermal units, down from $13.69 in July 2008. Cheniere
Energy Partners and other United States LNG
export projects have used the low price based on the price
benchmark set at the Henry Hub distribution facility to attract
"Chevron won't peg prices for the natural
gas exported from Kitimat to the United States Henry Hub
benchmark", Mr. Kirkland said. Instead, it will offer customers
equity stakes in the Kitimat project, which Mr. Kirkland said
should be more attractive to buyers.
"Henry Hub has variability it can go up and down," he said.
"We can get the same or a better situation for a buyer through
their equity participation in the project."
Dows Jones Newswires