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British Columbia Premier Christy Clark speaks at an announcement about a joint venture agreement with Shell Canada Energy, PetroChina Corporation, Korea Gas Corporation and Mitsubishi Corporation to develop a proposed liquefied natural gas (LNG) export project, in Vancouver, B.C., on Wednesday April 30, 2014. The proposed project is to be located in Kitimat, B.C. (Darryl Dyck/The Canadian Press)

British Columbia Premier Christy Clark speaks at an announcement about a joint venture agreement with Shell Canada Energy, PetroChina Corporation, Korea Gas Corporation and Mitsubishi Corporation to develop a proposed liquefied natural gas (LNG) export project, in Vancouver, B.C., on Wednesday April 30, 2014. The proposed project is to be located in Kitimat, B.C.

(Darryl Dyck/The Canadian Press)

B.C. government, Petronas sign letter of intent to support LNG Add to ...

The B.C. government and Malaysia’s state-owned energy company have agreed to co-operate on boosting the Pacific NorthWest LNG project, but the Opposition NDP cautions that there are major hurdles left to clear in the race to export liquefied natural gas.

Kuala Lumpur-based Petronas, which heads Pacific NorthWest LNG, plans to make a final investment decision by the end of 2014 on whether to spend billions of dollars on the ambitious export project.

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In Malaysia, B.C. Premier Christy Clark and Petronas chief executive officer Shamsul Azhar Abbas signed a letter of intent on Monday in a joint effort to support Pacific NorthWest LNG. A B.C. delegation led by Ms. Clark kicked off this week’s Asian trade mission with Malaysia as the first stop.

Petronas has asked the province to hammer out details of taxes to be levied against proposed B.C. LNG export terminals, while the government has requested that the Malaysian company ramp up plans for transporting northeast B.C. natural gas through a new pipeline to be built to a proposed LNG export terminal on Lelu Island, near Prince Rupert.

“Securing this commitment from Petronas shows that our strategy for attracting investment to B.C. is working,” Ms. Clark said in a statement from Kuala Lumpur. “Our goal is to be the most competitive jurisdiction in the world for LNG.”

Both sides agreed Monday to assign officials to prepare terms of reference by June 30 and then have a project development agreement in place by Nov. 30 – also effectively the deadline for the provincial Liberal government to table legislation for its two-tiered tax regime on proposed B.C. LNG export facilities.

If all goes well, Pacific NorthWest LNG will begin shipping natural gas in liquid form by tankers to Asia in late 2018.

But B.C. NDP caucus chair Shane Simpson said that while the letter of intent shows some good will, the document isn’t legally binding. “The reality is that until a final investment decision is made by any company, they are bound to nothing,” he said in an interview.

Petronas is the driving force behind Pacific NorthWest LNG. Its partners are China’s state-owned Sinopec, India’s state-run Indian Oil Corp. Ltd., Japan Petroleum Exploration and Petroleum Brunei.

“The environmental questions are going to be significant. And if the resource industry is going to be successful, there need to be working agreements with First Nations,” Mr. Simpson said. “Presenting a tax regime that will be acceptable to the industry is going to be tough. These are very real challenges, and these are challenges that the government has not resolved by any means.”

A recent report by FirstEnergy Capital Corp. said the B.C. government will telegraph its intent on the tax front. “The government continues to consult with project proponents on the details of this tax, meaning that it is unlikely that the industry will be surprised once the tax structure is introduced as legislation in the fall,” FirstEnergy said.

There are 14 B.C. LNG proposals in the works, but industry experts say there is room for only three or four projects at most.

One of the smaller projects got a lift on Monday, when Calgary-based AltaGas Ltd. said it has resolved a disagreement with Chinese energy firm ENN Group Co. Ltd. to allow AltaGas to spearhead plans to export LNG from Kitimat. Lawyers for LNG proponents told a B.C. Supreme Court hearing they are optimistic that new terms will be finalized. Original plans for the Douglas Channel Energy Partnership will now likely result in two proposals – one led by AltaGas and the other overseen by the Haisla First Nation and Golar LNG Ltd.

Follow on Twitter: @brentcjang

 

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