CALGARY—A liquefied natural gas (LNG) project planned for Kitimat, B.C., faces an uncertain future after one of its American partners announced plans to get out of the LNG business.
Apache Corp. said in its second-quarter news release that it plans to ditch the Kitimat LNG project, which it was developing alongside Chevron Corp., as well as the Wheatstone LNG project in Australia.
The Houston-based company has been under pressure from activist hedge fund Jana Partners LLC to restructure.
“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,” Apache said, adding it’s also weighing its options when it comes to some of its other international operations.
The Kitimat LNG project is furthest along in the development process of any of the proposed natural gas export facilities planned for Canada’s West Coast.
However, Chevron and Apache have not had an easy time securing buyers for the resource, said Ed Kallio, director of gas consulting at Ziff Energy, a division of Solomon Associates.
“Even though it’s a shovel-ready project, they’ve just had that weakness on the market end,” he said.
Kallio said the “A-list” Asian energy players are involved in competing LNG projects on the West Coast.
For instance, Korean, Chinese and Japanese firms have signed on to the Shell Canada Ltd.-led LNG Canada proposal near Kitimat.
Malaysia’s Petronas is leading the Pacific Northwest LNG near Prince Rupert, B.C.
Other global LNG buyers that don’t have as deep pockets are looking to get their supplies from proposed United States LNG players, Kallio added.
LNG is natural gas that has been chilled into a liquid state, enabling it to be shipped to global markets by tanker.
Chevron is the operator of Kitimat LNG, which it splits 50-50 with Apache.
The project is in its early engineering phase and key regulatory approvals are in hand.
However, the partners have not made a final decision to go ahead with building the facility, which has a permit from the National Energy Board (NEB) to export 10 million tonnes of LNG per year.