U.S. oil company Apache Corp. has sold off its interest in the Kitimat liquefied natural gas project in northern British Columbia to an Australian company, Woodside Petroleum Ltd.

Woodside bought the Kitimat project and Apache’s interest in the Wheatstone LNG terminal in Western Australia, as well as accompanying upstream oil and gas reserves, for $2.75 billion US.

Apache will also get an additional $1 billion to reimburse its net expenditure in the Wheatstone and Kitimat LNG projects between June 30, 2014, and the close of the deal, which is expected to be sometime in the first quarter of 2015.

It plans to pay down debt and repurchase shares with the proceeds of the deal, it said in a news release.

Apache and Chevron

Apache held a 50 per cent interest in Kitimat LNG with Chevron Canada. It also owns natural gas assets in the Horn River and Liard natural gas basins in B.C.

The Kitimat LNG project has been in limbo since Apache announced in August that it wanted to get out of the natural gas business. At the time, it was under pressure from activist hedge fund Jana Partners LLC to restructure.

The Kitimat project is one of 13 LNG exporting terminals planned in B.C. and the furthest along, though none of the projects have been given a go-ahead. The projects' backers hope to export to Asian markets.

LNG projects are capital intensive and there is hesitation in the face of low gas prices and competition from plants in Australia and on the U.S. west coast.  

“I am confident that Woodside’s participation will have a positive impact in seeing these world-class LNG facilities through to first production,” G. Steven Farris, chairman and chief executive officer of Houston-based Apache, said in a statement.

The $24-billion US Wheatstone facility in Western Australia, which is about halfway done, would be capable of shipping 8.9 million tonnes of LNG a year. Apache had held 13 per cent, again in partnership with Chevron.

In B.C., Natural Gas Minister Rich Coleman said the deal will strengthen the Kitimat LNG project.

"In moving forward, I think it probably stabilizes some of their marketability, probably their customers and certainly with those two companies working together that's a pretty formidable team of people that can bring that project to fruition," Coleman said.

"It's a good relationship that will develop out of these two groups and they are both globally large enough companies, both Chevron and Woodside, to do a deal."

With files from the Canadian Press