We’ve written a lot about the Kitimat LNG project here at Energy Ink. But the focus is usually on how lead proponent Apache Canada Ltd. feels about the $5 billion export scheme aimed at shipping the chilled fossil fuel from British Columbia’s West Coast to Asian markets.
Today, I bring you the perspective of one of the silent partners in this venture – EOG Resources Inc. (Encana Corp. is the other participant).
Staff from New York City-based Bernstein Research dined with EOG’s top executive, CEO Mark Papa, this week and quizzed him on a number of topics, including the Kitimat LNG project.
According to Bernstein, Papa sees Kitimat LNG as a core holding for EOG. The company owns a 30 per cent interest in it (Apache holds 40 per cent and Encana the other 30 per cent) and it has other assets in Western Canada.
It also produces a substantial amount of petroleum in Canada. In 2011, EOG produced 11 million barrels of oil equivalent (boe) in Canada and it says it has 192 million boe of proved reserves in the country.
In a Thursday research note, Bernstein’s Bob Brackett says EOG is willing to sell some of its stake in the Kitimat project to a buyer (likely of the Asian persuasion) looking for equity in the upstream portion of project. “EOG expects to dilute a portion of its stake for that purpose,” Brackett writes.
However, despite the fact the National Energy Board approved the Kitimat LNG project in late January, an investment decision hasn’t been made. While Canadian oil and gas industry observers wait for that to happen,Alberta Oil senior editor Jeff Lewis wrote this week that more entrants are joining the race to export LNG to Pacific Rim markets.
Brackett has also noticed the jockeying going on among the jurisdictions looking to supply Asia with LNG:
Competition for LNG marketing has noticeably ticked up, especially out of Australia and the Gulf Coast US, with Cheniere’s recent gas-linked contract strategy (Henry Hub plus a margin) putting pressure on sellers trying to obtain oil-linked agreements.
It’s clear companies looking to ship LNG from B.C. can’t wait forever to sanction and advance their projects. They have to act and lock up long-term sales contracts before the window closes in Asia. That window isn’t closed yet, but eventually it will.