Petronas Delays Decision on LNG Project in BC

Petronas announced on Wednesday that it will defer a $36-billion final investment decision on its liquefied natural gas (LNG) project in British Columbia.

The Malaysian state-owned company has a 62-percent share in the Pacific NorthWest LNG project on BC’s west coast, with the other partners being Sinopec (NYSE:SNP), JAPEX Montney, Indian Oil (NSE:IOC) and PetroleumBRUNEI. The LNG industry has been boosted in recent months by the BC government releasing a series of lower tax rates and incentives for companies to invest in the energy, as well as coming to agreements with First Nations groups. The breaks were made after Petronas threatened to pull out of the project in October as it derided the lack of incentives and tax breaks to do business.

According to a statement, Petronas is delaying the project “pending further clarity on substantive items of importance to ensure that critical project components align with economic viability of the Project and competition from other LNG producing countries.” The company alleges the cost of constructing a pipeline and falling gas prices have deterred its interest.

“PETRONAS hopes that all outstanding factors can be resolved as soon as possible to enable the Final Investment Decision to be made within the identified LNG supply and demand window. This is vital in light of the current intense market environment and for Pacific NorthWest LNG not to lose out on long term contracts to competitive United States LNG projects,” said Tan Sri Shamsul Azhar Abbas, president and group CEO of Petronas.

On Monday, BC Premier Christy Clark and LNG Minister Rich Coleman both expressed their optimism that a deal can be struck with Petronas. The government promised in the last election that the LNG industry could generate up to $1 trillion in revenue for the province.

Securities Disclosure: I, Nick Wells, hold no direct investment interest in any company mentioned in this article.