Premier's LNG plans hit a snag as major investor out of Kitmat LNG project

Jenny Uechi

The future of a major LNG project in Kitimat has been thrown into uncertainty, after one of its main backers has decided to walk out. Houston-based Apache Corporation says it will leave Kitimat LNG, which was a joint project with Chevron. 

"Consistent with the company's ongoing repositioning for profitable and repeatable North American onshore growth, Apache intends to completely exit the Wheatstone and Kitimat LNG projects," the company announced today in its second quarter report.

The news comes only one month after Premier Christy Clark took a tour of the Kitimat LNG site, and took photos with workers to promote the project. Even though the BC government has ambitious plans to build several LNG terminals in the province, with three built by 2020, some experts have warned that the proposals could be undermined by much nimbler global competitors and sinking gas prices in Asia. 

To date, Kitimat LNG is the only LNG export facility (of 16 proposed) that has been granted an environmental assessment certificate by the province. 

"While today’s news that Apache intends to leave the Kitimat LNG project changes the ownership structure of that particular proposal, we remain committed to developing a competitive liquefied natural gas export industry in British Columbia," the Premier's office told The Vancouver Observer.

"We look forward to hearing more details about Kitimat LNG’s future as the project moves forward, and encourage people to speak directly with either Apache or Chevron about their commercial business decisions."

Photo from BC government Flickr site

A victory for LNG opponents? 

The Kitimat LNG project was also the first to get export approval in Canada, and was the furthest along among the 16 LNG export projects in BC. The project was supposed to have been supplied by the proposed Pacific Trails Pipeline, which is currently being protested by a "soft blockade" at the Unist'ot'en Camp in Wet'suwet'en First Nation territory. 

The protest camp claimed Apache's exit was a 'victory' for LNG opponents in northern BC.

"Unist'ot'en Camp is claiming the recent announcement from Apache as a victory," a representative of the camp wrote on the group's website. "This is because all of the original investors (Encana, EOG, and now Apache) are bailing on the Pacific Trails Pipeline project." 

The Mayor of Kitimat, who has expressed strong support for the economic growth brought by the LNG boom, remained tight-lipped about the news.

"We won't have anything to say until tomorrow because we don't know enough yet," Kitimat Mayor Joanne Monaghan said. However, she said she believes "absolutely" that other LNG projects for the area will continue to be developed. 

Outside of Kitimat, LNG proposals face some stiff opposition from First Nations and northern BC residents who way the environmental costs of the projects will outweigh possible economic benefits. 

An uncertain future 

Chevron would not confirm whether it would be able to move forward with the project without Apache. 

"Chevron cannot comment on Apache’s plans to manage their joint venture interest in the Kitimat and Wheatstone LNG projects," Chevron-Apache LNG project communications manager Gillian Robinson Riddell said Thursday.

But analysts predict that Chevron will not proceed with the multi-billion dollar project.

“The odds increase that there will be no Kitimat (LNG),” said Fadel Gheit, an analyst with Oppenheimer & Co. in New York, in an interview with Bloomberg. 

“I would not think that they would be interested in going it alone. They had a bad experience in Australia with Gorgon and their co-pilots were Exxon, the best in the business,” he added.

Earlier this year, Apache had announced it was reducing its spending for Kitimat LNG, saying it was cutting its budget on the project by 40 per cent from $1 billion to $600 million. 

With files from Valentina Ruiz Leotaud and Mychaylo Prystupa