Petronas Scraps Canadian LNG Project (Correction)

(Corrects name and status of Shell's Canadian project, para 1)

The Petronas-led Canadian venture Pacific NorthWest LNG in Port Edward, British Columbia will not proceed as previously planned, the Malaysian state company said July 25. It joins a number of other Canadian LNG projects that were no longer able to compete in a low-price environment, including Shell’s shelved Prince Rupert LNG; and the $3.5bn Chevron led Kitimat LNG project which is yet to take a final investment decision (FID).

Petronas and its partners carried out a "careful and total review of the project." It blamed the decision on the "extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry."

Qatar's early July announcement that it planned to increase LNG output from the ultra-low-cost North Field in the next seven years by another 23mn mt/year or so might have been the final straw for this and other, pre-FID higher-cost LNG projects around the world.

Pacific NorthWest represents a potential investment of $11.4bn, the aim being to build at least two liquefaction plants each of 6mn metric tons/year and possibly a third, using gas from the North Monteny Joint Venture in Alberta.

Petronas and its North Montney 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 moving forward, the company said, thanking everyone who had supported the project, including the area First Nations, the District of Port Edward, the City of Prince Rupert, and their communities. 

One of the project's key allies, TransCanada Pipelines, said there was "still a strong need for Canadian natural gas supplies to get to market, and the infrastructure we are building in Alberta and British Columbia – including recently announced multi-billion dollar investments in our NGTL system and North Montney Mainline – are designed to help move natural gas supplies to markets where they are needed." It said the latter "important project is backed by independent 20-year commercial service agreements with 11 shippers (including Progress Energy)."

But in the meantime, it said, it was looking forward to full reimbursement of the costs and carrying charges incurred to advance the project. "We expect to receive this payment later in 2017," it said, without putting a figure on it in its statement the same day. 

The operator Petronas had 62% of the LNG export project; Chinese Sinopec had 15%; Japex 10%, Indian Oil Corp 10% and PetroleumBrunei had 3%.

William Powell