Petronas to buy stake in LNG Canada project

CALGARY Canada’s stalled West Coast LNG export industry got a major shot in the arm early Thursday with news that Malaysian state-owned energy company Petronas will take a 25 per cent equity interest in LNG Canada.

The Shell Canada-led project, with an estimated cost of $40 billion including a natural gas pipeline, is considered one of the most likely of some 20 proposed West Coast liquefied natural gas projects to proceed, with a final investment decision widely expected this year.

Petronas, meanwhile, is one of the largest natural gas explorers in the North Montney region of northeastern B.C. A year ago, it and its partners cancelled their $36billion Pacific NorthWest LNG project near Port Edward, B.C., due to what it called an “extremely challenging environment’’ brought on by prolonged low LNG prices.

Petronas has 52 trillion cubic feet of natural gas reserves and contingent resources in Canada, making the country home to the second-largest resource in Petronas’ portfolio after Malaysia, Wood Mackenzie senior analyst Prasanth Kakaraparthi said in a report.

“We believe this to be a positive development for Petronas,” the report says. “We expect the global LNG market to tighten post 2022 and this bodes well for the project.”

The analyst cautioned that activity is starting to ramp up again in the global LNG space with a number of new projects expected to be given approvals ahead of next year, creating competition and possibly rising project costs.

Neither Petronas nor Shell revealed in their news releases how much the former is paying to enter the LNG Canada consortium.

“Petronas is in Canada for the long-term and we are exploring a number of business opportunities that will allow us to increase our production and accelerate the monetization of our worldclass resources in the North Montney. LNG is just one of those opportunities,” said Petronas president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin in a release.

LNG Canada last month awarded Texas-based Fluor Corp., and JGC Corp., based in Japan, the contract for the engineering, procurement and construction of the LNG export facility in Kitimat, conditional on a positive final investment decision.

“The transaction announced today does not amount to an FID which remains pending,” Shell cautioned in a release. “The timing and outcome of an FID will be decided by joint venture participants based on global energy markets, and the overall competitiveness and affordability of the project.”