B.C. not worried by Petronas’ threats to pull LNG project.
Canada has to ‘buck up’ fast, Petronas says
The British Columbia government has met every deadline set out by Petronas Bhd., Rich Coleman, the province’s minister of natural gas development, said Thursday, as he sought to allay fears of the Malyasian company pulling out of its LNG project on Lelu Island in Prince Rupert.
Shamsul Abbas, Petronas’ chief executive, told the Financial Times Wednesday he doubted the firm would be able to make a final investment decision within its selfimposed deadline of the end of 2014 and that the project remains “uncertain.” He cited slow progress on B.C.’s new taxation scheme.
“Canada has to buck up real fast to be a credible global LNG player if it wants to be taken seriously by potential investors,” Mr. Shamsul told the newspaper ahead of a visit to Canada this week.
Mr. Coleman suggested there may be a “time lag” between the company’s negotiators in B.C. and its headquarters in Malaysia, as “we had really good meetings with them this week.”
“There was no indication at the table of any concern,” Mr. Coleman told reporters in Whistler, B.C., noting he spoke to company executives after reading the interview and they confirmed the government had met all its deadlines.
B.C. Premier Christy Clark also weighed in, saying the threat by Petronas is just part of negotiations over the province’s tax take.
“What Petronas is doing is standing up to try and get the absolute best deal that they can get for their shareholders. That’s what they should do. What we’re doing at the negotiating table is trying to get the absolute best deal for British Columbians and for Canadians. And that’s the process,” she said in Vancouver.
Mr. Coleman said he is “not concerned” about the chief executive’s comments, “public pronunciations when you are trying to negotiate things aren’t really helpful for the table.”
Companies have been critical of the B.C.’s fiscal tax regime proposal announced in February, which stipulated a 7% tax on LNG once the proponents have recouped their capital costs.
Since then the government has engaged in confidential talks with various LNG proponents on costs, taxation and financial incentives necessary to get the nascent industry off the ground. The government is expected to reveal a final LNG fiscal regime once the fall legislature begins on Oct. 6.
Most LNG proponents have raised concerns about Canada’s tax regime, but Mr. Coleman says it is “not the lever” that would secure a decision on a project as companies are looking at the total cost package.
“Our taxes are one of the smallest pieces, as far as costs and risks are concerned,” he said.
Pacific Northwest LNG, the company that is developing the project on behalf of Petronas and its Asian partners, is addressing community environmental assessment standards issues in and around fisheries in an area of Lelu island, Mr. Coleman said.
“We say we are going to be the cleanest and environmentally safe natural gas on the planet than we have to reach the standards that we set for that. Some jurisdictions would find our process slow as we do have those standards, but the fact of the matter is we have not missed a single deadline.”
Jack Mussallem, mayor of Prince Rupert, which is expecting a windfall if the industry takes off, said he hoped cooler heads will prevail so close to the deadline.
“It is important Pacific Northwest LNG and their principal Petronas recognize this is the first such facility in our part of the world and as such the various governments, ministries and agencies want to get it right. I am hoping that they will have a degree of patience.”
Ron Bedard, chief administrative officer of Port Edward which has municipal jurisdiction over the project, said the district is in talks with the company and province to agree on municipal taxes, which has been another irritant for LNG proponents.
Under the current rate, the company will have to pay Port Edward $22-million — roughly 10 times its current budget.
“To be fair it’s a bit on the extreme side,” Mr. Bedard said in a phone interview. “That’s why we are in negotiations right now, to see if we can come out with a formula that would represent our needs and give some certainty to the company as well.”
Petronas has been clear from the start that the financial numbers has to be right for them to proceed with the development, said Mr. Bedard, who is part of the negotiations on behalf of the district.
“I am not distributed by these [Petronas CEO] comments, because they are obviously in very high negotiations with both the province and the federal government. So it’s really a football that’s being kicked around all over the place.”