When I wrote my last column saying we shouldn’t expect any LNG projects in B.C. to be green-lighted any time soon, I did not expect the hammer to come down quite as quickly as it did.
As in Apache’s announcement of last week that it is pulling out of the Kitimat LNG project in favour of concentrating on North American energy plays.
This is the project that was the poster child for Premier Christy Clark who often pointed to it as the most advanced of any of the of the proposed LNG plants in B.C.
So does this announcement mean that Kitimat LNG is dead?
Of course not.
If Apache can find buyers for its 50 per cent share that have deep pockets, they are in it for the long haul and, most importantly, will be the users of the LNG, then this will be just another bump in the road.
But as I understand it Apache has been trying to sell a 10 per cent share since last fall without success. Which begs the question, if you cannot find a buyer for that 10 per cent, what are the chances you will find one or more to take up 50 percent?
An optimist would offer up another scenario: Chevron buys out Apache to take 100 per cent of the project.
Ain’t gonna happen, says Chevron vice-chairman George Kirkland.
In a conference call with investors as reported by Reuters, he said Chevron was not interested in buying even part of Apache’s stake and in fact would be prepared to sell a small portion of its own 50 per cent.
That didn’t surprise me.
Chevron owns 47 per cent of the Gorgon LNG project in Australia, the one that saw original cost estimates in the mid-$30 billion range explode to more than $50 billion.
And 64 per cent in Wheatstone, another Aussie project, that will come in at around $30 billion.
Given it is already in for a fistful of dollars just with those two, I can understand why it would be in no hurry to carry the full load of Kitimat LNG.
And there is one huge difference between the Kitimat project and the Aussie ones. While Kitimat LNG is marking time, Gorgon will be shipping out product by the middle of next year and Wheatstone will be doing the same by the end of 2016.
It makes perfect sense therefore to get those up and running and create cash flow before taking on more multi-billion dollar expenditures.
(As an aside, Apache has a 13 per cent stake in Wheatstone which it also plans to dump. Given the project will be producing in just two years, Apache’s headlong retreat into Fortress America seems illogical.)
So why do I believe Kitimat LNG will eventually go ahead?
Major companies like Chevron and Shell have long horizons. They know that 10 or 20 years from now the gasfields will still be there waiting to be tapped. The potential LNG sites will still be there. And the customers will still be there.
It’s just a matter of time and they have lots of that.
Therefore this project – and others in the northwest – are not dead. They are, like Monty Python’s parrot, merely sleeping.
FOOTNOTE: Someone who doesn’t have that much time is Premier Clark.
When she took office the provincial debt was $45 billion. As of March 31 this year it had ballooned to $60 billion, a 33 percent increase.
Of course that didn’t matter because, according to the promise the Liberals ran on in the May 2013 election, the revenues from a British Columbia LNG industry export tax would wipe the slate clean leaving a debt-free province.
A bit like running up all your credit cards figuring a lottery win will save the day.
When Clark leads her troops into the May 2017 election – if indeed she does – there will not be a single operational LNG plant. And it looks long odds there will even be one under construction. Plus the provincial debt will most likely be even higher.
So what campaign slogan will the Liberals be running on then: be patient, it’ll be alright?
That’ll work.
Retired Kitimat Northern Sentinel editor Malcolm Baxter now calls Terrace home.
