Woodside, new Kitimat LNG partner, borrows $1 billion in new bonds

Woodside PetroleumWoodside Petroleum, the new partner with Chevron in the Kitimat LNG project is raising US$1 billion through the issue of corporate bonds into the U.S. market “to fund its capital and exploration expenditure program.”

A news release from Woodside says “the bonds will be issued by Woodside Finance Ltd, a wholly owned subsidiary of Woodside Petroleum Ltd, and will consist of US$1 billion of 10 year bonds with a coupon of 3.65 per cent. The bonds will be guaranteed by Woodside Petroleum Ltd and its wholly owned subsidiary, Woodside Energy Ltd.”

Bloomberg notes that Woodside paid $2.75 billion to Apache for its stakes in the Kitimat LNG and the Australian Wheatstone LNG project.

Woodside agreed in December to pay $2.75 billion to Apache Corp. for stakes in two natural gas projects, and it expects to spend about $6.2 billion in 2015.

Even after its agreement with Apache, Woodside has a strong balance sheet that may allow the company to make another acquisition and take advantage of low crude oil prices, according to a Feb. 18 report from Goldman Sachs Group Inc. Woodside has $6.8 billion in cash and available debt facilities, the energy producer said in a presentation that same day.

Woodside said last week that full-year net income rose 38 percent to $2.41 billion, helped by its Pluto project. Brent crude oil prices have tumbled 44 percent over the past 12 months.

In January, Australian Mining reported that Woodside had reached an “non-binding contract…  as an agreement between Woodside Petroleum and Adani Enterprises to cooperate in developing commercial initiatives for long-term supply of gas to the Indian market.”

Moricetown band joins Pacific Trail Partnership, Kitimat LNG now has all First Nation councils on board

Chevron,  the lead corporation in the Kitimat LNG project announced on January 23 that the Moricetown Indian Band had agreed to join the First Nations Limited Partnership, in effect, approving the Pacific Trail Pipeline that would take natural gas to the project in Kitimat.

Here is the news release from all parties involved.

First Nations Limited PartnershipVancouver, British Columbia, January 23, 2015 – The First Nations Limited Partnership (FNLP) today announced that Moricetown Indian Band (Moricetown) has joined the FNLP. The FNLP is a commercial partnership that, with the addition of Moricetown, now includes all of the 16 First Nations whose traditional territory is located along the proposed 480 kilometre Pacific Trail Pipeline (PTP) route from Summit Lake to Kitimat, B.C.

“The decision of the Moricetown First Nation Band Council to join the First Nations Limited Partnership is one that we warmly welcome,” said the Honourable Bob Rae, Chairman of FNLP.

“It means all 16 First Nations along the proposed Pacific Trail Pipeline route are partners in a unique approach that combines environmental stewardship, extensive job, procurement, and other economic benefits, and direct financial transfers on a regular basis to each First Nations community.”

The FNLP is without precedent in the Canadian energy industry and the Pacific Trail Pipeline is the only proposed natural gas pipeline for a liquefied natural gas (LNG) facility in B.C. with such a benefits agreement. The proposed PTP and Kitimat LNG Facility projects are owned by Chevron and Apache through a 50/50 joint venture and are operated by Chevron.

“This agreement is unparalleled in balancing strong economic growth measures with preserving our cultural heritage and the environment. There is, quite simply, no other deal that comes close to what we’ve been able to achieve in this partnership,” said Chief Dan George of Ts’il Kaz Koh (Burns Lake).

The commercial partnership ensures that FNLP Nations receive immediate and long-term benefits from the PTP project. These include up to $550 million in direct financial benefits over the life of the PTP project, including a recent enhanced benefit of $10 million a year operating life of the PTP project from the Province of British Columbia. The FNLP Nations also receive substantial economic development, skills training, employment and contracting benefits from PTP under the terms of the agreement.

Chevron Logo“Chevron Canada wishes to commend all parties for creating a partnership between industry and First Nations based on mutual respect, trust and economic self-determination. We welcome Moricetown as the 16th member of the FNLP, and look forward to building the Pacific Trail Pipeline with First Nations in a manner that places the highest priority on protecting people and the environment,” said Jeff Lehrmann, President, Chevron Canada Limited.

Measures that reflect environmental protection, vitality of traditional cultural values, protection of aboriginal rights and title, economic self-determination and a sustainable future for First Nations are also part of the FNLP agreement. Members of the FNLP have already received significant benefits to date from the agreement, including $17 million in financial payments.

“We have already seen over 1,600 First Nations members receive skills training through the PTP Aboriginal Skills to Employment Partnership, better known as PTP ASEP. Over 900 of these trainees have found jobs,” said Chief Karen Ogen of the Wet’suwet’en First Nation.

First Nations employment currently accounts for 54 per cent of all early works construction workforce hours to date on the Pacific Trail Pipeline. To date, FNLP members have also been awarded over $245 million in PTP construction contracts, and over 65 per cent of construction contract expenditures have been made to member First Nation businesses.

The agreement also facilitates joint ventures between FNLP and companies engaged in the PTP Project. As such, the FNLP Nations not only have a clear financial interest in the pipeline construction but, just as importantly, also have a strong voice in ensuring the preservation of environmental and cultural integrity.

“The FNLP is an innovative model for how industry and First Nations can cooperate effectively with respect to major economic development projects,” said the Honourable Bob Rae.
About First Nations (PTP) Group Limited Partnership (FNLP)

The First Nations (PTP) Group Limited Partnership (FNLP) is a limited partnership of 16 First Nations whose traditional territories are located along the transportation corridor between Summit Lake and Kitimat, British Columbia.

FNLP was formed to secure significant, reliable and long-term economic benefits for its limited partners from the proposed PTP Project.

FNLP member Nations are:

* Haisla Nation
* Kitselas First Nation
* Lax Kw’alaams Band
* Lheidleh T’eneh First Nation
* McLeod Lake Indian Band
* Metlakatla First Nation
* Moricetown Indian Band
* Nadleh Whut’en First Nation
* Nak’azdli Band
* Nee Tahi Buhn Indian Band
* Saik’uz First Nation
* Skin Tyee First Nation
* Stellat’en First Nation
* Ts’il Kaz Koh First Nation (Burns Lake Indian Band)
* West Moberly First Nations
* Wet’suwet’en First Nation
About PTP and the Pacific Trail Pipelines Limited Partnership

The proposed 480-kilometre Pacific Trail Pipeline Project is jointly owned by Chevron Canada Limited (Chevron) and Apache Canada Ltd. (Apache) through the Pacific Trail Pipelines Limited Partnership (PTPLP). The PTP is intended to deliver natural gas from Summit Lake

B.C. to the proposed Kitimat LNG facility on B.C.’s north coast. The Pacific Trail Pipelines Limited Partnership (PTPLP) acquired the project in February 2011 from Pacific Northern Gas.

 

The fact that the Moricetown Band had held out for so long was seen as one of several factors that was holding up a Final Investment Decision by Chevron and its soon to be new partner, Australia’s Woodside Pretroleum, which is currently finalizing a deal to buy Apache’s stake in the project. Chevron vice chairman, George Kirkland was asked about it during an investor conference call in August, 2014 At the time,  Kirkland hinted at the potential problems with the Pacific Trails Pipeline, where there is still a dispute with members of the Wet’suwet’en First Nation. “We’re going to focus on the pipeline and the end of the pipeline corridor. That’s important and we’re putting some money into that to finalize the pipeline routing, get all our clearances and then we’ve got work going on.”

The Unist’ot’en Camp group which opposes energy development in the traditional territory of that House has not yet commented on the announcement. However, earlier Friday at a protest in Winnipeg, Freda Huson, Spokesperson for the Unist’ot’en People and Hereditary Chief Toghestiy of the Likhts´amisyu Clan, issued this statement.

¨The Hereditary Chiefs of the Wet´suwet´en People will stop all attempts from Pipeline Companies, Colonial Governments, and their sell-out employees from bringing Tar Sands Bitumen or Fracked Gas onto our lands. We have ancestral integrity which guides us and will help us ensure that we make the right decisions to protect our lands for all of our unborn generations. We will hold ALL those accountable for attempting to enable destructive agendas to take hold on our sacred lands. We will use our traditional governing systems, the colonial courts, grassroots Indigenous Peoples, and our media savy to make everyone associated with Pipelines, Tar Sands, and Fracking activity from affecting our unceded lands. We are armed with our indomitable spirit and 2 Supreme Court of Canada decisions and will use them against any more aggressors on our unceded lands. Consider this a warning for attempting to trespass on our homelands. We have defended our lands for countless generations and we will stand up like our ancestors have to ensure that we never are viewed as weak in the eyes of our ancestors or children.

Apache sells Kitimat LNG stake to Australia’s Woodside Petroleum

Apache CorporationApache Corporation today announced it has agreed to sell its interest in two LNG projects, Wheatstone LNG and Kitimat LNG, along with accompanying upstream oil and gas reserves, to  Australila’s Woodside Petroleum Limited for a purchase price of $2.75 billion.

The news release says:

Apache will also be reimbursed for its net expenditure in the Wheatstone and Kitimat LNG projects between June 30, 2014, and closing which is estimated to be approximately $1 billion.

Under the terms of the agreement, Apache will sell its equity ownership in its Australian subsidiary, Apache Julimar Pty Ltd, which owns a 13-percent interest in the Wheatstone LNG project and a 65-percent interest in the WA-49-L block which includes the Julimar/Brunello offshore gas fields and the Balnaves oil development. The transaction, which has an effective date of June 30, 2014, will also include Apache’s 50-percent interest in the Kitimat LNG project and related upstream acreage in the Horn River and Liard natural gas basins in British Columbia, Canada.

Woodside PetroleumBased on current estimates, Apache’s net proceeds upon closing are expected to be approximately $3.7 billion. Receipt of proceeds from this transaction will trigger an estimated $650 million cash tax liability, approximately $600 million of which is associated with the income tax due on Apache’s Overall Foreign Loss account balance. Upon incurring this income tax liability, Apache estimates that it will have the flexibility to repatriate cash generated from foreign operations and/or future international strategic transactions with minimal U.S. cash tax impact.

“Today’s announcement marks the successful completion of one of our primary strategic goals of exiting the Wheatstone and Kitimat LNG projects. Apache recognizes the contribution of our employees who have worked so diligently on these projects since their inception, and we sincerely thank them for their tremendous effort. I would also like to thank Woodside’s CEO and Managing Director, Peter Coleman, and his entire staff for their hard work and professionalism in bringing this transaction to a successful conclusion. I am proud of Apache’s legacy in advancing the Wheatstone and Kitimat LNG projects, and I am confident that Woodside’s participation will have a positive impact in seeing these world-class LNG facilities through to first production. We look forward to the redeployment of the proceeds from this sale, which may be used to reduce debt, repurchase shares and to pursue other opportunities that enhance our asset base and drive profitable production growth,” said G. Steven Farris, chairman, chief executive officer and president.

Upon completion of the transaction, Apache will continue to hold upstream acreage offshore Western Australia in the Carnarvon, Exmouth, and Canning basins along with related hydrocarbon reserves and production. Apache will also retain its 49-percent ownership interest in Yara Holdings Nitrates Pty Ltd and 10-percent interest in the related ammonium nitrate plant.

The transaction is expected to close in the first quarter of 2015 and is subject to necessary government and regulatory approvals and customary post-closing adjustments. The sale of the Kitimat LNG project is subject to certain operator consents.

Aussie energy company eyeing Apache stake in Kitimat: media reports

The Australian Business Review is reporting that Woodside Petroleum, a cash rich Australian energy company, has its eye on Apache’s 50 per cent stake in the Kitimat LNG project. As part of any deal, Woodside would probably also have to buy Apache’s stake in the Australian Wheatstone LNG project, which is also up for sale.

The months-long process by Apache to find a new home for its West Australian domestic gas business and its stake in the under-construction Wheatstone LNG project — as well as its stake in the Kitimat LNG project in Canada — has drawn plenty of interest from parties in that neck of the woods.

The cashed-up, project-hungry Woodside Petroleum has been interested from the outset in the Kitimat stake, but is also said to be prepared to make an offer on Wheatstone if Apache is determined to sell the assets together


WoodsideEarlier,  another Australian newspaper, The Age reported that Woodside’s petroleum and LNG operations had “revenue of $US5.3 billion for the first nine months of 2014. Compared with the corresponding period in 2013, revenue was 28.7 per cent higher for the 2014 period.”Part of the money came from selling natural gas assets in the United States.

According to The Age:

Woodside’s LNG production rose to a record 5.1 million tonnes for the first nine months of Woodside’s fiscal 2014. The record production represents a rise of 17.6 per cent on the same period for 2013. Behind the result was the operational performance of the Pluto LNG facility (Woodside’s interest is 90 per cent). Pluto lifted LNG production by 24.3 per cent on the corresponding period in 2013, to 3.1 million tonnes. Pluto also produced 2.2 million barrels of condensate for the first nine months of 2014. Oil production rose by a mammoth 33.3 per cent on the same period in 2013, to 8.8 million barrels.

On November 6, according to the Sydney Morning Herald, Woodside’s CEO Peter Coleman warned that the Asian customers for LNG who are holding out for cheaper prices could face a  “supply crunch” and “By holding out for a cheaper price, customers are potentially exacerbating project FID [final investment decision] delays and may unwittingly help bring on a supply crunch.”

He called on suppliers and customers to work together to  ensure supply projects went ahead.

The Woodside website describes the company as  “Australia’s largest independent dedicated oil and gas company and one of the world’s leading producers of liquefied natural gas.​​​​​​”

It goes on to say

As we aspire to become a global leader in upstream oil and gas, we are guided by the Woodside Compass. The Compass links Woodside’s core values – respect, integrity, working sustainably, working together, discipline and excellence – with our vision, mission and strategic direction.

Woodside has an extensive portfolio of facilities which we operate on behalf of some of the world’s major oil and gas companies.
We have been operating the landmark Australian project, the North West Shelf, since 1984 and it remains one of the world’s premier liquefied natural gas (LNG) facilities.

With the successful start-up of the Pluto LNG Plant in 2012, Woodside now operates six of the seven LNG processing trains in Australia.

PetroChina in multi-billion dollar LNG buying spree in Canada and Australia

PetroChina went on a multi-billion dollar natural gas buying spree Thursday, Dec. 13, 2012, picking up shares in operations in both Canada and Australia.

In Canada, Encana, one of the partners in the Kitimat LNG project, signed a joint venture arrangement with Phoenix Duvernay Gas, a wholly owned subsidiary of PetroChina, to explore and develop Encana’s extensive undeveloped Duvernay naturgal gas holdings in west-central Alberta. According to an Encana news release, Phoenix will gain a non-controlling 49.9 per cent interest in Encana’s approximately 445,000 acres in the Duvernay play for total consideration of C$2.18 billion.

Hours earlier, PetroChina agreed to pay $1.63 billion for BHP Billiton’s 10 per cent share for an Australian LNG development, known as Browse, that like the KM LNG project in Kitimat had been delayed by the uncertainty in the LNG market. The other partners in the Browse are Woodside Petroleum, Chevron Corporation, Royal Dutch Shell and BP.

Encana says the PetroChina/Phoenix investment is significant for the Duvernay, which Encana describes as a “liquids rich play” with potential for natural gas, butane and oi development.

THE Encana release quotes Randy Eresman, Encana President & CEO. “A transaction of this magnitude keeps us on track to create a more diversified commodity portfolio and maintain our balance sheet strength. It is a strong endorsement of Encana’s position as a reliable long term partner.”

The release also quotes Zhiming Li, Phoenix’s President & Chief Executive Officer, as saying The Duvernay project will combine Phoenix’s integrated upstream and downstream capabilities and financial resources with Encana’s proven resource play hub expertise. This joint venture will build a foundation for the successful development of the Duvernay play and help to diversify our business portfolio. Encana is our ideal long term partner for the development of our future natural gas business.”

The company goes on to say:

Having entered into several joint venture transactions in 2012, these types of arrangements have become an important part of Encana’s business model. Joint ventures help the Company to achieve a highly efficient deployment of capital throughout its vast exploration and development asset base as Encana transitions to a more diversified portfolio of commodities.

Significantly, the Encana release, while talking about LNG development and export, it makes no mention of the Kitimat KM LNG project, instead looking south to Louisiana.

These relationships have the potential to increase natural gas demand as a number of Encana’s partners are actively exploring opportunities to export liquefied natural gas (LNG), while some are industrial consumers looking to transition to natural gas as fuel for their operations. An example is a recent agreement with Nucor Energy Holdings (Nucor) which is designed to support Nucor’s increased use of natural gas for its facilities, such as its direct reduced iron facility currently under construction in Convent, Louisiana.

Reports say PetroChina paid a premium price for the Australian Browse natural gas project, anticipating that if it comes on stream, as planned in 2018, the current glut in the natural gas market will have eased and once again LNG will be a seller’s market.

The Browse project at James Price Point on the north-western coast of Australia is facing similar opposition to projects in British Columbia, including some of the site’s aboriginal landowners and from some environmental groups.

The opposition to the Australian Browse project, according to reports,  reflects a split in the local aboriginal community.  While Wikipedia says that 60 per cent of the local aboriginal people voted in favour of the project, there is also fierce opposition, according to the Australian Mining Journal, which reported in 2009:

[A] number of Traditional Owners, as part of the Save The Kimberley organisation, issued a statement which said there is not unanimous support for this site.

In a signed declaration, Traditional Owners have affirmed that they do not support the imposition of an industrial site on their country and will legally challenge the authenticity of any agreements entered into by the Kimberley Land Council supporting the proposal.

The statement said that “…many local Indigenous people are disgusted by the apparent abandonment of the established process put in place by the previous State government. Concerns include the threats made earlier in the year by the Premier regarding compulsory acquisition of land and the pre-empting of the Joint State and Commonwealth environmental and cultural assessment process via announcements by Woodside and the Premier.”

 

A company called Woodside Petroleum, which leads the LNG venture wants to build the “greenfield” onshore terminal but is facing competition from Shell’s proposed offshore floating LNG “given the land access challenges and soaring development costs in Australia,” even though Shell also has a stake in the Browse project.

The Encana PetroChina deal comes a week after the Conservative government approved the takeover of Nexen by the China National Offshore Oil Corporation (CNOOC) and the take over by the Malaysian state oil company Petronas of Progress Energy. Petronas and Progress Energy have announced plans for an LNG export facilty at Lelu Island, opposite Port Edward, near Prince
Encana spokesman Jay Averill told the Globe and Mail the Duvernay deal will not need approval from Investment Canada because PetroChina will only gain a 49.9-per-cent, non-controlling share of the specific Encana assets.

In Australia, in October, CNOOC bought a stake in Queensland Curtis LNG from British energy company BG. BG, in partnership with Spectra Energy has also announced plans for an LNG facility at Prince Rupert 

Related links

Petroleum Economist
PetroChina pays premium for Browse stake

Calgary Herald

PetroChina inks $2.18B deal with Encana Joint venture to invest $4 billion to develop Alberta Duvernay