Chevron Corporation, a major player in the energy sector, has reportedly decided against taking an equity stake in Woodside Energy Group Limited’s upcoming acquisition of Driftwood LNG in Louisiana. This decision aligns with Chevron’s existing strategy of ‘buy-rather-than-build’ when it comes to US natural gas. Colin Parfitt, head of midstream operations at Chevron, told Reuters that the company can effectively monetize its US gas without converting it into liquefied natural gas (LNG).
This choice reflects Chevron’s previous decision to avoid direct investment in US LNG plant construction, preferring instead to sell its gas directly to the market. In July 2023, Chevron executives emphasized their confidence in this strategy, which was also highlighted in a report by S&P Global.
Chevron’s decision to focus on international sales of its Permian Basin production through LNG offtake contracts emphasizes its commitment to expanding its global reach. The company has chosen to leave the development of US midstream infrastructure to third parties, allowing them to concentrate their resources on upstream and downstream investments. This approach is evident in Chevron’s recent long-term LNG sale and purchase agreements with Cheniere Energy, signed in 2022.
The current interest rate environment, marked by recent reductions, might have influenced Chevron’s decision to avoid investing in LNG plant construction. With the Federal Reserve indicating further rate cuts in the coming years, it remains to be seen if Chevron will reconsider its stance on LNG plant investment. However, the company remains committed to making the most effective use of its capital.
Chevron continues to explore avenues for reducing its environmental impact. This week, Chevron Shipping Company, in collaboration with Wärtsilä, announced plans to convert engines on six of its LNG carriers from dual-fuel to spark gas operation. This conversion is aimed at cutting methane emissions and advancing the company’s carbon reduction goals.
For investors interested in gaining exposure to Chevron, options include the E.A. Series Trust Strive U.S. Energy ETF (DRLL) and the SPDR Select Sector Fund – Energy Select Sector (XLE).
Chevron’s stock price closed Friday at $145.18, up 0.13%.
