Vancouver Sun

More gas projects on B.C. horizon

Drop in costs clearing way for Petronas-led export plans

- YADULLAH HUSSAIN TECHNOLOGY

TORONTO — 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 North-West LNG, a consortium led by Malaysia’s state-owned 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 Petroleum BRUNEI, deferred a final decision last December on the West Coast project as the company was not “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 North-West is also negotiatin­g for lower costs with TransCanad­a 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 with the original mandate of 750 km, with as much as 100 km offshore.

“We are 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.”

“That’s going to be ultimately the long-date item. So, a commercial final investment decision by June, and we will then wait for whatever final permitting and environmen­tal assessment comes.”

Royal Dutch Shell’s $70-billion US acquisitio­n of BG Group Plc this week doesn’t affect timelines for the Petronas project.

“We are working very closely with TransCanad­a and we expect to have final pricing as we get to the end of April.

MICHAEL CULBERT CEO OF PACIFIC NORTHWEST LNG

 ?? DARRYL DYCK/THE CANADIAN PRESS FILES ?? Petronas will make a decision on a West Coast investment in June, after deferring in December.
DARRYL DYCK/THE CANADIAN PRESS FILES Petronas will make a decision on a West Coast investment in June, after deferring in December.

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