The natural gas sector ended the year on a high note following the announcement that one of the world's leading energy firms has agreed to operate — and buy a partial stake in — a proposed liquefied natural gas (LNG) project on Canada's British Columbia coast.
Kitimat LNG's project moved a step closer to reality last week when Chevron (NYSE: CVX) announced that it will buy out the minority positions that Encana (TSX:ECA,NYSE:ECA) and EOG Resources (NYSE:EOG) hold in the endeavor. In doing so, Chevron has established itself as a 50-percent owner in a project that is ready for construction, but has fallen victim to a number of delays amid uncertainty surrounding sales contracts. Chevron also confirmed that it will take a 50-percent interest in approximately 644,000 acres of petroleum and natural gas rights in the Horn River and Liard Basins in British Columbia. Chevron and Apache (NYSE:APA) will now share ownership of the project, with Chevron operating the plant and related Pacific Trail Pipeline, which is set to transport oil from Northeastern BC. In October 2011, the National Energy Board granted Kitimat LNG a 20-year export license to serve international markets. The proposed project is currently in the front-end engineering and design phase; during its first phase it will be able to export 1.4 billion cubic feet (bcf) per day, or 5 million tons of LNG per year, a number that is expected to double in the future, according to the Calgary Herald. Apache previously led the project, but never signed an offtake agreement to sell LNG to Asian buyers, an article in The Globe and Mail states. The company originally expected to make a final investment decision earlier in 2012; however, without guaranteed sales agreements, the decision to move the project forward proved impossible.