* Chevron takes half interest in Kitimat LNG
* Buys out Encana, EOG stakes and becomes operator
* Adds exploration lands in northern British Columbia
* Apache to net $400 million
* Terms undisclosed, analyst estimates Encana, EOG paid $450
By Scott Haggett
CALGARY, Alberta, Dec 24 Chevron Corp
said on Monday it will enter the Canadian liquefied natural gas
business with the acquisition of the 50 percent stake in the
Kitimat LNG project held by Encana Corp and EOG
Chevron will take Encana's and EOG's 30 percent stakes in
the LNG-export project for an undisclosed price as the No.2 U.S.
oil company looks to jumpstart North American natural gas
It will also buy the two companies' interest in a pipeline
serving the project, at Kitimat, 650 kilometers (400 miles)
north of Vancouver, and will pay $550 million for a half stake
in 644,000 acres of exploration lands in the Horn River and
Liard shale-gas fields owned by Apache Corp.
Apache will then pay Chevron $150 million to raise its stake
in the British Columbia project and associated lands to 50
percent, netting the U.S. independent oil and gas producer $400
million from the transaction.
Analysts say the addition of a deep-pocketed partner
increases the likelihood that the multi-billion dollar Kitimat
LNG -- the most advanced of a handful of gas-export facilities
slated for British Columbia's northern coast -- will be
"With Chevron involved it will happen sooner than it
otherwise would have," said Michael Dunn, an analyst with
Though no price was given, Robert Morris, an analyst with
Citi Research, estimates that Encana and EOG each received about
$450 million for their stakes and the exploration lands.
Kitimat LNG was last year awarded Canada's first LNG export
license by the National Energy Board, allowing it to export 10
million tons of LNG per year. The project is slated to begin
shipping gas to Asian markets by 2017.
Other Canadian LNG facilities are planned by Royal Dutch
Shell Plc, Malaysia's Petronas, BG Group Plc
and others, making British Columbia a rival to the U.S.
Gulf coast, where nine projects have been announced and one,
Cheniere Energy Inc's, Sabine Pass project, is already
Chevron has existing LNG projects in Australia, Africa and
South America. Adding the Canadian operation will let it tap
high-priced export markets and escape a domestic gas market that
remains depressed because of burgeoning production from shale
"This investment grows our global LNG portfolio and builds
upon our LNG construction, operations and marketing
capabilities," George Kirkland, Chevron's vice chairman, said in
a statement. "It is ideally situated to meet rapidly growing
demand for reliable, secure, and cleaner-burning fuels in Asia,
which are projected to approximately double from current levels
Encana said the sale of its stake was consistent with its
plan to focus on its core natural gas business and that the deal
will reduce its future capital commitments while EOG will now
focus on U.S. crude oil production.
The acquisition is expected to close it the first quarter of
Chevron shares fell $1.00 to $108.71 by early afternoon on
the New York Stock Exchange while Apache fell $1.35 to $78.65
and EOG dropped 72 cents to $122.83
Encana shares were down 51 Canadian cents at C$19.62 on the
Toronto Stock Exchange.