A Petronas logo is seen near its twin towers in Kuala Lumpur in 2007.Zainal Abd Halim/Reuters
The Petronas-led liquefied natural gas venture in British Columbia will be delayed by up to 15 years unless tax and regulatory issues are resolved by month's end, the chief executive officer at the Malaysian energy giant warns.
Shamsul Azhar Abbas said the next four weeks are crucial, and Kuala Lumpur-based Petronas wants to reach a meeting of minds by Oct. 31 with government officials and regulators.
The Petronas-led Pacific NorthWest LNG joint venture has budgeted $36-billion for its plans to export LNG from the West Coast to Asian buyers by early 2019. The capital spending includes $11-billion for a proposed export terminal on Lelu Island, situated near Prince Rupert in northwestern British Columbia.
"In order to remain competitive, Petronas needs to secure consensus on key principles vital to the success of this project by the end of October," Mr. Shamsul said in a statement on Monday. "Missing this date will have the impact of having to defer our investments until the next LNG marketing window, anticipated in 10-15 years."
Last month, he threatened to cancel the project unless regulators cut red tape and the B.C. government unveils a competitive tax regime soon. But industry observers point out that Petronas already has spent billions of dollars on northeast B.C. natural gas drilling projects, making it financially painful if Malaysia's state-owned energy company were to stage a full-scale withdrawal.
Mr. Shamsul is now cautioning that Pacific NorthWest LNG is in danger of being shelved for a long time. "The proposed fiscal package and regulatory pace in Canada threatens the global competitiveness" for Pacific NorthWest LNG, he said, adding that his preliminary review shows higher-than-expected costs for B.C. construction contractors.
Pacific NorthWest LNG is one of 17 B.C. proposals, though industry analysts caution there is only room for four projects in the province due to fierce global competition.
"The additional tax and high-cost environment will negatively impact the project's economic viability and competitiveness. In fact, in our last portfolio review exercise, the current project economics appeared marginal," Mr. Shamsul said.
Mr. Shamsul met with B.C. Premier Christy Clark and B.C. Natural Gas Development Minister Rich Coleman in Vancouver last week to discuss sticking points. The Petronas CEO now wants Pacific NorthWest LNG to be in a position to make a final investment decision by mid-December, or two weeks earlier than the year-end deadline previously announced.
Mr. Coleman said Monday that Mr. Shamsul struck a conciliatory tone during his visit last week. "Petronas and the province remain committed to working together to ensure benefits for British Columbians and to achieve a competitive framework," Mr. Coleman said in a statement. "Over the next month, we intend to table legislation on a competitive tax framework and the environmental policies required to ensure we build the cleanest LNG facilities possible. We will continue talking with all proponents, including Petronas, as we further this work."
Pacific NorthWest LNG filed its environmental impact statement in February. The Canadian Environmental Assessment Agency, which is co-ordinating the regulatory review with its B.C. counterpart, expressed concerns to Pacific NorthWest LNG in a letter in May.
The project's employees will consult with First Nations as company officials alter designs for a trestle bridge or jetty, said Michael Lambert, Pacific NorthWest LNG's head of environmental and regulatory affairs, in his Sept. 4 letter to the B.C. Environmental Assessment Office.
Brent Jang