China’s state-owned Sinopec is joining a B.C. liquefied natural gas project led by Malaysia’s Petronas, giving a lift to the joint venture on the eve of Premier Christy Clark’s Asian trade mission.
Petronas is the driving force behind Pacific NorthWest LNG, which announced Tuesday that Sinopec will become the project’s fourth partner. The Chinese energy company will acquire a 15-per-cent stake in Pacific NorthWest and has agreed to sign long-term contracts to buy the commodity to be shipped by tankers.
Ms. Clark will leave Friday for Asia to tout the province’s fledgling LNG industry. The B.C. delegation’s itinerary includes stops for meetings in Malaysia, a lunch event in Singapore organized by the Canada-ASEAN (Association of Southeast Asian Nations) Business Council on May 7 and a breakfast speech by the B.C. Premier in Hong Kong on May 9.
Pacific NorthWest has emerged as the leading proposal among 14 projects that hope to send B.C. LNG to customers overseas. Industry experts predict that only three or four export terminals at most will get built in British Columbia, and projects that are able to secure Asian buyers to commit to taking delivery of LNG will have a competitive advantage.
Ms. Clark will be at a news conference Wednesday with officials from the Shell Canada Ltd.-led LNG Canada project, who will provide an update on plans to export from Kitimat in northwestern British Columbia.
Sinopec, whose formal name is China Petroleum & Chemical Corp., signed a 20-year pact to acquire 1.8 million tonnes annually of LNG as a condition of becoming a co-owner in Pacific NorthWest. Sinopec also stated that it is willing to take delivery of a further three million tonnes annually of LNG over 20 years.
After the deal closes, Petronas will hold a 62-per-cent interest in Pacific NorthWest, while four partners will have a combined 38-per-cent stake.
In March, Petronas announced that it signed a deal to add Indian Oil Corp. Ltd. as a partner in Pacific NorthWest and also the North Montney Joint Venture, which has huge natural gas reserves in northeastern British Columbia. India’s state-run Indian Oil and Japan Petroleum Exploration will each hold 10 per cent of Pacific NorthWest when the Petronas-Indian Oil agreement closes, while Petroleum Brunei owns 3 per cent.
The Petronas-led team is aiming to announce a final investment decision by the end of 2014 and targeting the start of exports in late 2018. Petronas chief executive officer Shamsul Azhar Abbas, who signalled in February that new partners would be signed up, will be the keynote speaker at an LNG conference in Vancouver next month.
Petronas’ Progress Energy Canada unit has been stepping up its natural gas drilling program in northeastern British Columbia. Petronas’ multibillion-dollar plans include transporting northeast B.C. gas to Lelu Island, located near Prince Rupert in the northwestern part of the province.
British Columbia is relying on “greenfield” projects that effectively mean starting from scratch, in contrast to LNG ventures in the Middle East and U.S. Gulf Coast where “brownfield” sites will be able to take advantage of existing infrastructure, said Patricia Mohr, vice-president and commodity market specialist at Bank of Nova Scotia.
Uncertainty remains on pricing for B.C. LNG, and whether Canadian supplies will be linked with oil or natural gas markets or a formula that includes both. But the Petronas-Sinopec deal shows that the nascent B.C. LNG sector is gaining momentum, said Dundee Capital Markets analyst Maxim Sytchev.
“The geopolitical uncertainty in Europe, where energy has once again become a policy tool, makes the potential Canadian supply an attractive option from a supplier perspective,” he added in a research note.Report Typo/Error