Petronas kills $27 billion Pacific Northwest LNG project, cites low prices, too many competitors

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Artist rendering of Petronas Pacific NorthWest LNG.

 Malaysia’s energy company says it remains committed to developing gas assets in Canada

Petronas and its partners have decided not to proceed with the Pacific NorthWest LNG project at Port Edward in British Columbia, Canada, according to a press release.

The decision was made after a careful and total review of the project amid changes in market conditions.

“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,” said Anuar Taib, executive VP upstream.

Industry shifts include a flood of new LNG facilities, led by the Americans.

“The competition is not just worldwide, but the competition is in the United States and the Gulf Coast. The have huge supply coming from shale natural gas and they have built export facilities by turning around plants that were intended to be import LNG,” says energy economist Michal C. Moore in an interview.

“And the Americans now have a wider Panama Canal and much larger ships to be able to ship with. So that’s a hard space for Canada to break into. It’s hard to compete in that market and it’s harder to catch up once you’re behind.”

Petronas affirmed its commitment in Canada and through Progress Energy Canada Ltd and its world-class inventory of natural gas resources where the subsidiary plays a key role in supporting Petronas growth strategy in North America.

Petronas owns Progress Energy Canada Ltd., which holds the largest natural gas reserves in the country, with over 28 trillion cubic feet of proved plus probable unconventional reserves and produces more than 750 million cubic feet equivalent of natural gas per day from its unconventional lands in northeast British Columbia. 

“We, along with our North Montney Joint Venture partners, remain committed to developing our significant natural gas assets in Canada and will continue to explore all options as part of our long-term investment strategy moving forward,” added Anuar.

Petronas has come under fire from environmental groups and aboriginal communities who said it would increase greenhouse gas emissions and destroy a critical salmon habitat. In May 2016, 90 climate scientists called on Prime Minister Justin Trudeau to reject the LNG project.

“The environmental assessment that would form the basis for a decision concerning this LNG project is incomplete and superficial. For this reason alone the proposal should be rejected outright,” said Dr. Danny Harvey, a senior Canadian climate scientist, said in the letter to Trudeau.

“We have a window of opportunity to develop B.C.’s LNG industry, but the next several years will be critical. We risk losing thousands of jobs and billions of dollars in benefits if B.C. does not have diversified access to markets,” the B.C. LNG Alliance said in a statement on the cancellation.

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