Petronas LNG project still on the table, says B.C. Energy Minister Rich Coleman
Malaysian state-owned energy company Petronas is threatening to pull out of a liquefied natural gas project on
B.C.'s Minister of Natural Gas Development Rich Coleman says he's not concerned about the reports oil and gas giant Petronas is threatening to pull the plug on a $10-billion dollar liquefied natural gas project.
The CEO of Petronas, Shamsul Abbas, told the Financial Times he's "ready to call off" that project because of delays in the approval process, the B.C. government's LNG tax and a "lack of appropriate incentives."
"Rather than ensuring the development of the LNG industry through appropriate incentives and assurance of legal and fiscal stability, the Canadian landscape of LNG development is now one of uncertainty, delay and short vision," Abbas told the Financial Times.
The Pacific Northwest project would deliver LNG from B.C.'s interior to its coast and from there to Asia.
But Coleman says he doesn't believe the project is at risk, noting Petronas has already invested money on design in B.C. and talks on the project are scheduled with Abbas when he is in Canada next week.
"I know what's going on at the table. And I know there's good progress. I can't jeopardize that. He's going to be here at the end of the month, have a visit with me and the premier," said Coleman.
"We'll talk about it. He knows any meeting we've had, there's a balance that needs to be struck for competitiveness"
Gearing up for negotiations
High-profile energy industry lawyer David Austin agrees with Coleman that the comments are likely just a bit of posturing before real negotiations get underway.
"The reality is Petronas has already spent $5 billion on natural gas reserves in British Columbia, and I don't think they invested in those natural gas reserves for the purposes of supplying more gas to an over-supplied North American market."
The company has been involved in a plan for two plants in northwestern B.C. worth more than $10 billion, as well as a $5 billion pipeline.
Professor Michael Moore who teaches energy economics at the University of Calgary says it is possible the company's threat is just an attempt to get more incentives, but it should still be taken very seriously.
B.C. is lagging behind other jurisdictions vying for the LNG export market and Petronas must be taking notice, says Moore.
"They have got a lot invested in this already, but look forward it is hard not to imagine that in their board rooms they are saying, 'We need to solve some of these potential road blocks, all the way from future lawsuits, to permission to build in various segments along the way, to relationships with First Nations' people."
B.C. tax proposed on LNG
Petronas is leading the Pacific Northwest LNG project near Prince Rupert, B.C. The company holds a 62 per cent stake in the project.
Its partners include China's Sinopec with a 15 per cent stake, Japex Montney with 10 per cent, Indian Oil Corp. Ltd. with 10 per cent and PetroleumBrunei with three per cent.
Pacific Northwest LNG is one of several projects that various companies have been considering as a way to export natural gas by tanker from the West Coast. There are now 13 proposed LNG projects in B.C.
The B.C. government proposed earlier this year a two-tier LNG tax on income from liquefaction of natural gas at facilities in B.C.
Petronas bought Progress Energy Corp. in 2012 in a deal that was closely scrutinized by Ottawa.
With files from The Canadian Press