This article first appeared in The Edge Malaysia Weekly on October 9, 2017 - October 15, 2017

LAST week, Petroliam Nasional Bhd (Petronas) and its subsidiary Progress Energy Canada Ltd made the headlines again when it was made known on the website of the latter’s adviser that its Deep Basin assets in Alberta were up for sale.

This inevitably raised questions as to whether the national oil company was bowing out of Canada. After all, it had shelved its US$29 billion Pacific NorthWest LNG project in Prince Rupert, British Columbia, just a few months ago because of soft market conditions.

However, the notion that Petronas was exiting Canada was quickly dispelled when Progress Energy issued a statement, saying that it would focus its investments on its unconventional natural gas assets in North Montney, British Columbia.

“Progress regularly reviews its assets to ensure alignment with the company’s strategy. Following the most recent evaluation, Progress determined that selling its Deep Basin assets would allow the company to focus future investment on its vast resource in the North Montney in British Columbia, which represents significant growth opportunity for the company,” the statement says. “Progress anticipates that its high-quality Deep Basin assets, which have been a big part of the company’s success since 2004, will be of interest to companies that specialise in this resource type.”

The company owns oil and natural gas assets in Alberta’s Deep Basin and unconventional natural gas assets in North Montney.

Progress Energy’s spokesperson had highlighted in the Canadian newspapers that the Deep Basin assets “represent a small portion of the company’s resource base”.

Petronas has kept mum about the matter and when contacted by The Edge, referred to the statement issued by Progress Energy.

Market observers believe Petronas’ commitment to its Canadian assets is intact. After all, they are the national oil company’s biggest gas reserves outside Malaysia. In a previous interview with The Edge, Petronas CEO Tan Sri Wan Zulkiflee Wan Arifin had said the reserves are expected to last 30 years.

The Montney is a massive shale gas field with 449 trillion cu ft (Tcf) of proven gas reserves, according to Canada’s energy board. Progress Energy’s site is in North Montney, an area that is twice the size of Melaka. Today, it has proven reserves of 22.3 Tcf — a number that has increased significantly since Petronas acquired Progress Energy in 2012, when the proven reserves stood at slightly more than 13 Tcf.

Progress Energy’s statement is also telling of Petronas’ business strategy — it has no reservations about monetising its Canadian portfolio for its benefit, which, in this case, has resulted in the sale of its Deep Basin assets.

In 2012, Petronas paid C$5.5 billion for Progress Energy and was poised to build an export terminal for C$11 billion, spend C$6.5 billion on pipelines, and had allocated expenditure for other things in Lelu Island, south of Prince Rupert, all for a total of C$36 billion.

It later sold a 38% stake in Pacific NorthWest LNG Ltd, the company that was slated to develop the export facility, which would have included a 900km pipeline targeted at exporting LNG to Asia.

The Malaysian oil and gas giant maintained a 62% stake in Pacific NorthWest LNG, whose other shareholders include China Petrochemical Corp (15%), Japan Exploration Petroleum (10%), Indian Oil Corp (10%) and Petroleum Brunei (3%).

In a previous article, oil and gas industry observers had told The Edge that the stake sold would have reduced significantly the company’s capital outlay and that while the amount of proceeds from the sale was never disclosed, it is likely to have been substantial.

For the cumulative six months ended June 30, 2017, Petronas reported a profit after tax of RM17.35 billion on revenue of RM108.15 billion. The profit after tax was up more than 100% from a year earlier due to higher realised prices and lower net impairment on assets and well costs.

Progress Energy is providing around 540 million standard cu ft of gas per day for the domestic market, according to Petronas’ mid-year results statement, generating revenue of C$2.641 billion in the first two quarters of 2017.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.