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Chevron to withdraw from Kitimat LNG
As “a result of Chevron’s disciplined approach to capital allocation and a downward revision in its longer-term commodity price outlook, the company will reduce funding to various gas-related opportunities including Appalachia shale, Kitimat LNG.
Chevron announced its 2020 organic capital and exploratory spending program of $20 billion, the third consecutive year it hasn’t boosted spending. As “a result of Chevron’s disciplined approach to capital allocation and a downward revision in its longer-term commodity price outlook, the company will reduce funding to various gas-related opportunities including Appalachia shale, Kitimat LNG, and other international projects.”
Just last week, Chevron had said that it was pleased to receive the approval of the Canada’s energy regulator (NEB) for a 40-year licence to export natural gas from Kitimat LNG project, doubling the previously approved export licence duration and increase the potential output of the proposed LNG facility to about 18 MMT/Y (3-train), a substantial increase over the previous 10 MMT/Y (2-train), 20-year licence which was set to expire at the end of this year.
Chevron had also stated that the increase in scope is designed to improve the project's "cost of supply competitiveness" compared with other LNG projects around the world. Its application envisions commissioning of the facility by 2029 instead of 2024 as previously scheduled.
The Kitimat LNG project is designed to be the world's first all-electric LNG plant powered by renewable hydroelectricity. The project is in its pre-FEED phase.
Mosi Nabi Director of Consultancy Services at Global LNG Info has suggested that “it is most likely that Woodside Petroleum follow Chevron, [its 50% partner in the Kitimat LNG project] and would annul or at least substantially postpone the project as the Australian company is heavily engaging in its home LNG export developments i.e. Pluto expansion (Scarborough) and Browse.”
Last year, Woodside had revealed that it has listed the Kitimat LNG project for the year 2027 and beyond as the project is listed in the company's Horizon III portfolio of projects. However it had reminded that Kitimat LNG partners have "continued activities to improve the competitiveness of the project, together with ongoing engagement with the British Columbian and Canadian governments."
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On 30 Jan. 2015, Bloomberg reported that Chevron is significantly slowing spending on the Kitimat LNG project amid a crash in crude prices and global competition. “People are pretty cautious right now in the LNG market,” the US-based company’s CEO John Watson said, adding that it’s not clear all the new projects being considered can be profitable at lower prices.
The price of LNG is linked to oil, which has dropped more than 50 percent since June highs, prompting major energy companies to cut jobs and capital spending. Chevron has already slashed its drilling budget by the most in 12 years. The company doesn’t plan to make final decisions on projects this year, other than for its Tengiz field in Kazakhstan, Watson said, reminding that Chevron is cutting spending on LNG worldwide by 20 percent this year to $8 billion.
While Chevron curbs spending for Kitimat LNG, it will continue to develop gas fields in British Columbia’s Liard Basin to support the export facility, secure permits and reach agreements with aboriginal groups as it is aligned with its partner Woodside on the project, the CEO said.
Chevron said that it will also continue efforts to secure marketing agreements with prospective buyers from Kitimat LNG in 2015 and negotiate with the British Columbia government on its policies. “Front-end engineering and design work will continue, as the companies try to reduce costs of the plant and pipeline.”
On 15 Jul. 2019, Chevron announced that it has been seeking approval to modify its plans for the Kitimat LNG export facility on to an all-electric design which “will result in the lowest greenhouse gas emissions per ton of LNG of any large project in the world”.
Chevron and partner Woodside Petroleum revealed that the project would comprise two phases, namely the optimization of the two LNG train configuration to use all-electric drive design (powered by hydroelectricity) with a combined output capacity of 12 MMT/Y, an optimized marine terminal and reduced LNG storage capacity and a potential expansion that includes an additional LNG processing train pushing the total capacity to 18 MMT/Y, an LNG storage tank and an additional LNG loading berth on the Kitimat LNG foundation project site.
Kitimat LNG instead proposed a 700-MW electric motor to run all liquefaction, utility compressors, pumps, and fans with hydropower bought from the local utility. It will have backup diesel power generators onsite for emergencies. If the project proposal is approved, Kitimat LNG will produce less than 0.1 ton of carbon dioxide equivalent for every ton of LNG compared with a global average of more than 0.3 ton of CO2 equivalent.
Chevron and Woodside expect to make a final investment decision for the project in 2022 to 2023 with the production start scheduled for 2029 as the revised proposal may trigger a need for a federal environmental assessment.

Source(s) GLNGI Staff, Bloomberg, Image: Chevron