PETR.L Share News (PETR)

(Adds details about possible stake sale, project)

By John Tilak, Ernest Scheyder and David French

TORONTO/HOUSTON, March 5 (Reuters) - Chevron Corp isexploring options including the sale of a minority stake in itsCanadian liquefied natural gas (LNG) project as it pushes ahead,three people familiar with the matter told Reuters.

Among the parties in talks with Chevron for a possible stakein Kitimat LNG are Petroliam Nasional Bhd, orPetronas, which scrapped its own $36 billion LNG project inBritish Columbia last year due to challenging market conditions,two of the people said.

Reuters spoke over the past week to the sources, who saidthere is no certainty that Chevron would proceed with the stakesale. The persons spoke on condition of anonymity because theprocess is private.

Chevron declined to comment, and Petronas did not respond toa request for comment.

Chevron is also considering selling a stake in the projectto a financial investor such as a Canadian pension fund or aprivate equity firm, the people added.

Canadian companies Seven Generations Energy Ltd andTourmaline Oil Corp are in discussions to supplynatural gas to Chevron's project, the people said. SevenGenerations may also consider buying a stake in the project bypartnering with other gas producers, the people said.

While any possible deal with a financial investor would bestrictly a cash infusion to help support the cost of buildingthe project, a deal with a producer could be structured as acommitment to supply natural gas to the plant for a period of 20to 25 years, the people said.

Canadian pension funds have a huge appetite forinfrastructure-style assets that offer stable cash flows over along period, and pipeline investments tend to have thoseattributes.

The project in British Columbia, a 50/50 joint venture withAustralia's Woodside Petroleum Ltd, has a 20-year, 10million-metric-tonne-per-year export license for LNG and isexpected to cost tens of billions of dollars to build.

Kitimat could become one of the largest capital investmentsin a Canadian energy project, Chevron says on its website.

Taking such a substantial investment decision has beendifficult for the duo, given concerns over a global LNG supplyglut for the last three years. Fierce political opposition inWestern Canada to building pipelines and other energyinfrastructure has also escalated in the last several years.

However, surging gas demand from China and Southeast Asia isreassuring export project developers that the market cycle isfinally beginning to turn.

Seven Generations declined to comment, and Tourmaline didnot respond to a request for comment.

Located about 1,400 kilometers north of Vancouver, theKitimat project was earmarked to utilize shale gas extracted inthe northern part of British Columbia and export LNG toenergy-hungry markets in Asia.

San Ramon, California-based Chevron acquired its 50 percentstake in Kitimat in early 2013 from EOG Resources Incand Encana Corp.(Reporting by John Tilak in Toronto and Ernest Scheyder andDavid French in HoustonAdditional reporting by A. Ananthalakshmi in Kuala Lumpur, JulieGordon in Vancouver and Aaron Sheldrick in TokyoEditing by Denny Thomas and Matthew Lewis)