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November 20-21, 2014

Chevron plans Kitimat FID in 2014

Chevron plans to make a final investment decision on the Kitimat LNG project in Canada in 2014, Hydrocarbon Processing reported. The plant is planned for the British Columbia coast. Chevron bought a 50 percent stake in the project in February, becoming an equal partner with Apache. Apache originally planned to make a final investment decision in late 2011 or early 2012. Apache later suspended the decision because of slow progress in finding customers for the facility’s LNG. Chevron is trying to secure buyers for the LNG. It won’t approve the project until it has lined up customers for at least 60 percent of the plant’s total 5 million tonnes per annum of export capacity.

Part of the problem with securing buyers is that buyers can shop around before committing to contracts, said Fadel Gheit, analyst at Oppenheimer & Co. “ExxonMobil and BG Group have each announced plans for possible LNG 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,” Gheit said. Whereas Cheniere and other U.S. LNG export projects have used the Henry Hub price benchmark to attract customers, Chevron won’t peg prices for the LNG exported from Kitimat to this benchmark. “Instead, it will offer customers equity stakes in the Kitimat project,” said George Kirkland, head of Chevron’s upstream business. “Henry Hub has variability it can go up and down. We can get the same or a better situation for a buyer through their equity participation in the project,” Kirkland said.

 


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