Petronas warns of possible delay in Canada LNG project

-A +A

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) said it could have a tough time reaching a positive final investment decision by mid-December 2014, given the high project costs, tax and regulatory environment it faces.

In a statement yesterday, Petronas said the proposed fiscal package and regulatory pace in Canada threaten the global competitiveness of the Pacific North West liquefied natural gas (PNW LNG) project.

“This is further exacerbated by preliminary project costs, which indicate cost of local contractors to be higher and not benchmarked against global contractors’ cost,” said Petronas president and group chief executive officer Tan Sri Shamsul Azhar Abbas (pic).

According to Petronas, the additional tax and high cost environment will negatively impact the project’s economic viability and competitiveness. In its last portfolio review, the current project economics appear marginal.

“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. Missing this date will have the impact of having to defer its investments until the next LNG marketing window, anticipated in 10-15 years,” the group said in its statement.

“At this juncture, Petronas firmly believes there should be an urgent need for stakeholders to collaborate and come to an agreement, rather than act as opposing parties at the negotiation table,” it said.

However, Petronas said it is “encouraged” by the commitment shown by the British Columbia (BC) government regarding the project.

“We believe that the PNW LNG project has the ability to monetise, add value and link BC natural gas to the global market to the benefit and prosperity of Canadians, especially to British Columbians,” it said.

This article first appeared in The Edge Financial Daily, on October 8, 2014.