The scandal over Malaysia’s sovereign wealth fund, 1MDB, has inevitably muddied the waters over British Columbia’s pending $35 billion liquid natural gas (LNG) project being led by Malaysia’s state-owned Petronas oil and gas company.
Early this month, Petronas said it will make a final decision on whether to proceed with the Pacific NorthWest LNG project by the end of the year. The company, which owns 62% of the project along with partners from China, India, Japan and Brunei, said it is awaiting the report on the scheme by the Canadian Environmental Assessment Agency, which is due by the end of October.
The weak state of the liquefied natural gas industry has raised questions about whether Petronas wants to go ahead with the project to export British Columbia’s LNG to Asia.
Declining energy prices dragged down Petronas’ revenues by 25% last year and the company says its dividend this year will be cut by 40%. This, and the failure of 1MDB to meet a loan payment, have cast a pall over Petronas’ plans to raise about US$7 billion in a bond sale.
Petronas senior management answers directly to Prime Minister Najib Razak, who is under pressure to resign over claims that around $US3.5 billion is missing from 1MDB. The most vocal pressure on Najib to resign is coming from former prime minister Mahathir Mohamad, who has been senior adviser to Petronas for 13 years.
But in March Najib sacked Mahathir from his Petronas job and replaced him with the more amenable Abdullah Badawi. Badawi was briefly Malaysia’s prime minister before Najib took over in 2009.
It was inevitable that Petronas would be drawn into the 1MDB scandal. Allegations have swirled for years that many state-owned companies, including Petronas, are used as carriages for the funding of the ruling United Malays National Organisation.
