Chevron Prioritizes Gas Sales Over LNG Plant Investment: Report

Chevron Corporation CVX reportedly ruled out taking an equity stake in Woodside Energy Group Limited WDS upcoming acquisition of Driftwood LNG in Louisiana.

Colin Parfitt, head of midstream operations, told Reuters that Chevron can effectively monetize its U.S. gas without converting it to LNG.

The decision reflects the company’s earlier choice to bypass investment in U.S. LNG plant construction and sell its gas directly to the market instead.

In July 2023, Chevron executives said in an interview that the company is confident in its ‘buy-rather-than-build’ strategy, which an S&P Global report highlighted.

During the interview, the company’s executives stated that Chevron’s U.S. LNG offtake contracts support its goal of increasing international sales of Permian Basin production, while the company will primarily leave U.S. midstream infrastructure development to third parties to focus on upstream and downstream investments.

In 2022, Chevron U.S.A. entered into long-term LNG sale and purchase agreements with Cheniere Energy. Notably, given the current interest rate environment, it’s interesting that Chevron chose not to invest in the construction of a U.S. LNG plant.

Recently, the Federal Reserve decided to reduce interest rates by 50 basis points leading to surge in optimism across major sectors.

Further into the future, the Dot Plot signals the fed funds rate will drop to between 3.25% and 3.5% by the end of 2025, implying an additional 100 basis points of cuts. By the end of 2026 and the newly introduced projections for 2027, interest rates are expected to fall to 2.9%.

It remains uncertain whether the company will alter its stance after future rate reductions as it wants the best use of its capital.

This week, Chevron Shipping Company, in partnership with Wärtsilä, disclosed that it will convert engines on six liquefied natural gas (LNG) carriers from dual-fuel to spark gas operation to cut methane emissions and support its carbon reduction goals.

Investors can gain exposure to the Chevron via E.A. Series Trust Strive U.S. Energy ETF DRLL and SPDR Select Sector Fund – Energy Select Sector XLE.

Price Action: CVX shares are up 0.13% at $145.18 at the last check Friday.

Photo by Jonathan Weiss on Shutterstock

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Disclaimer: This content was partially produced with the help of A.I. tools and was reviewed and published by Benzinga editors.