Chevron picks up immediate LNG growth opportunity
Chevron's planned $50 billion acquisition of Anadarko is much more than a Permian acreage play. By buying Anadarko, Chevron is tapping into huge LNG growth opportunities. The deal would provide the ultramajor entry into diverse, long-term supply contracts in new geographies.
Anadarko's 26.5% stake in Mozambique LNG, which is nearing FID on the initial 12.9 mmtpa base project at Area-1, will be a game-changer for Chevron's LNG market position. The approval would provide Chevron a key opportunity to break into a broader customer base amongst Chinese and Indonesian NOCs, European utilities and an Indian refiner.
We see the potential for new market share extending for decades to come. Area-1 has the resources to underpin a 40 mmtpa LNG project, with brownfield expansions likely to be significantly cheaper to develop . Chevron has the chance to nearly double its LNG capacity via brownfield upgrades.
Next steps for Chevron
To capitalize on its new market share, the ultramajor may also focus on expanding its LNG trading and marketing portfolio.
Without the deal, Chevron's expansion options lacked diversity outside of Australia, with only Kitimat in Canada, IDD in Indonesia and the Clio-Acme tie back in Australia offering long-term growth prospects. We don't believe that the true value of Anadarko's stake in Mozambique LNG is fully priced into their share price.
Anadarko will also give Chevron plenty of additional gas production in the US Lower 48. This will included growing associated gas in the Permian, where Chevron is already the largest gas producer. This could strengthen the case for Chevron to invest in or acquire tolling capacity in potential US LNG projects, an investment it has eschewed in the past.
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