Petronas pulls the plug on Pacific NorthWest LNG project

After investing billions in Canada, Malaysian oil and gas company is cancelling its Prince Rupert LNG project
The PNW LNG plant in Prince Rupert would have cost $11 billion to build; total investment, including pipeline and gas assets, was $36 billion.

Petronas has officially pulled the plug on its $36 billion Pacific NorthWest LNG project in Prince Rupert.

“We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision,” Anuar Taib, chairman of the PNW LNG board of directors, said in a July 25 press release.

“Petronas and its North Montney Joint Venture partners remain committed to developing their significant natural gas assets in Canada and will continue to explore all options as part of its long-term investment strategy.”

The significant gas assets Taib referred to are its holdings in the Montney of northeastern B.C., which were acquired when Petronas acquired Alberta’s Progress Energy.

While it was in opposition, the NDP officially opposed the PNW LNG project.

At a press conference this morning, one reporter asked Michelle Mungall, the new Energy, Mines and Petroleum Resources minister, what kind of message it sends to the international investment community for the NDP to lose a $36 billion project in its eighth day in office. Mungall said the cancellation was a decision based solely on market conditions.

“The company was very clear,” she said. “This was a decision they are making because of the economic challenges in the global energy marketplace. The Pacific NorthWest LNG project, as proposed in its current state, was uneconomical to move forward.

“Our government is committed to working with the LNG industry to ensure that we are competitive," Mungall said.

She reiterated the NDP’s demands, however, for supporting the industry: that it guarantees jobs and training for British Columbians, First Nations are made partners, that it is done in an environmentally responsible way and that “the province receive a fair rate of return for our resources.”

Green Party Leader Andrew Weaver seized on the cancellation of the project as an “I-told-you-so” moment. Weaver has long derided the Liberal government’s attempts to foster an LNG industry as futile.

“Since the beginning it has been clear that the global marketplace does not support the LNG industry that the BC Liberals promised in their 2013 election campaign,” Weaver said.

“B.C.’s future does not lie in chasing yesterday’s fossil fuel economy; it lies in taking advantage of opportunities in the emerging economy in order to create economic prosperity in B.C.”

Pointing to the Aurora LNG project, also proposed for Prince Rupert, Mungall said there are still would-be LNG developers in B.C. Mungall said the NDP is committed to working with other LNG developers, like Nexen.

But as BIV points out in today’s story on that project, the developer, Nexen, may have been hoping that Petronas would blaze the path for a new natural gas pipeline. The Aurora LNG project description does not mention a pipeline, and there is currently no natural gas pipeline running from northeast B.C. to Prince Rupert that could supply a large LNG project.

Despite Taib's insistence that his company's decision was strictly one based on markets and economics, Jihad Traya, manager of natural gas consulting for Solomon Associates, said he believes a new Green-backed minority NDP government coming to power has a lot to do with the timing of Petronas' announcement.

"What's happening now is very clear that there is somewhat of a non-confidence vote in British Columbia – period," he said. "There will be a need for global LNG, but the investment's saying 'Hey, we can go elsewhere and not have to deal with this headache."

nbennett@biv.com

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