There are new signs of uncertainty for British Columbia’s liquified natural gas industry this week, as one of the province’s marquee projects faces another blow.
The second of two key investors in the proposed Kitimat LNG development, Australia-based Woodside Petroleum Ltd., announced Wednesday it plans to sell its 50 per cent stake in the project.
Earlier this year, Chevron Canada Ltd. said it would stop funding feasibility work on the project. Chevron put its interests up for sale in December 2019, but no buyer has yet stepped forward.
Chevron has written down its investment on the project by $2.2 billion, while Woodside has written its investment down by $720 million.
David Austin, a lawyer who focuses on the energy industry, called the announcement a “big deal.”
“There aren’t many active players left on development side of the LNG industry in British Columbia,” he told Global News.
“Shell is proceeding with its phase one of (the LNG Canada project) in Kitimat, Woodfibre closer to Squamish looks like it may eventually move to a final investment decision in the fall, but beyond that there aren’t a lot of active players in B.C. at this time.”
In announcing the divestment Tuesday, Woodside acting-CEO Meg O’Neill said the company had undertaken a review of the project after Chevron pulled out.
O’Neill said the company had sought to develop new LNG supply for Asian markets later in the decade, but had decided to refocus funds on “opportunities that will deliver nearer-term shareholder value.”
Austin said the project may be a casualty of the success of renewable energy sources and bigger and cheaper batteries that can store the electricity they produce.
“Potential purchasers of LNG don’t want to commit to long term contracts,” he said.
“One of the reasons they don’t want to commit to long-term contracts is the price of renewable generated electricity such as wind and solar has dropped 80 to 90 per cent over the last 10 years or so.”
Austin said the Woodfibre LNG project near Squamish has signed an agreement with British Petroleum for its product, which could help with a positive final investment decision next fall.
He said Shell has yet to make an announcement on Phase 2 of the LNG Canada project.
— With files from the Canadian Press
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