Petronas LNG project looking good
Improved economic conditions favour exporting from B. C. coast
Low oil and gas prices have improved the economics for a Petronas- led natural gas export project on the British Columbia coast as the company looks to make a final investment decision in June.
“Over the past three months, we have driven costs down in a very significant way,” Michael Culbert, CEO of Pacific NorthWest LNG, a consortium led by Malaysia’s stateowned Petronas, told an energy conference in Toronto this week.
“As oil prices came down, other projects started to slide and defer, and we were in a situation where the EPCs ( engineering procurement and construction companies) could take the contingencies they had built in their proposals and take those out, and we were able to lock ( costs) in.”
Petronas, along with partners Sinopec, Japan Petroleum Exploration Co. Ltd., Indian Oil Corp. and PetroleumBRUNEI, deferred a final decision last December on the West Coast project as the company wasn’t “satisfied that Canadian LNG, and our project in particular, was viable,” Culbert said.
The company has spent the past few months proving up natural gas reserves at the North Montney region of northeast B. C., which is crucial to ensure a long- term supply of feedstock for the project. It has taken its proven, so- called 2P reserves to 17.9 trillion cubic feet in the basin, exceeding its target.
Pacific NorthWest is also negotiating for lower costs with Trans- Canada Corp., which is contracted to build the Prince Rupert Gas Transmission project from the North Montney region.
After consultations with First Nations, the pipeline’s length increased to 900 kilometres compared to the original mandate of 750 km, with as much as 100 km offshore.
“We’re working very closely with TransCanada and we expect to have final pricing as we get to the end of April.”
The federal government’s allowance for capital accelerated costs, which gives LNG proponents a tax break, has also “added to the certainty,” Culbert said.
The proponent is expecting to receive a decision from the National Energy Board on tolling for the pipeline shortly, but another permit from the Canadian Environmental Assessment Agency for the project is taking “a lot longer than anybody anticipated.”
Royal Dutch Shell’s US$ 70 billion acquisition of BG Group Plc this week doesn’t affect timelines for the Petronas project.