A major change in oil…
Interest in offshore wind is…
In view of prolonged depressed prices and shifts in the energy industry, Malaysia’s energy company Petronas has decided not to proceed with plans for an LNG terminal in British Columbia—a decision that sounds the death knell for US$29 billion (C$36 billion) worth of energy projects in Canada.
“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,” Petronas’ Executive Vice President & Chief Executive Officer Upstream, Anuar Taib said, adding that the company and its joint venture partners remain committed to developing their natural gas assets in Canada.
The Pacific Northwest LNG project was aimed at exporting Canadian gas from British Columbia, with plans for 220 LNG carriers every year. The scrapping of the project delivers a heavy blow to Canada’s ambitions to become an LNG player, and a win for the opposition to the project.
Petronas’ decision to drop the LNG terminal plan comes just a week after Canada’s federal court of appeal killed TransCanada’s pipeline project that would have linked to the LNG terminal, kicking the project back for redetermination by the National Energy Board (NEB). The court ruled that the NEB had made erred when it decided that the project was not under federal jurisdiction when it sent the plan for provincial approval.
Responding to Petronas’ decision yesterday, TransCanada’s executive vice-president and president, Karl Johannson, said in a statement that “following receipt of a termination notice, TransCanada would be reimbursed for the full costs and carrying charges incurred to advance the PRGT project. We expect to receive this payment later in 2017.”
TransCanada’s spending on the project was US$400 million (C$500 million) as of April, spokesman Shawn Howard told Reuters.
Analysts were not surprised by the decision to scrap the project given years of delay, low prices, and abundance of global supply.
“There is simply too much LNG export capacity planned in North America, and cancellations, especially of Canadian projects, are likely to continue,” Muhammed Ghulam, an equity research associate at Raymond James in Houston, told Bloomberg in an email.
In addition, higher-cost project like Petronas’s need higher prices for long-term contracts, while buyers in Asia prefer flexible terms that the U.S. LNG suppliers are offering with prices linked to U.S. benchmark prices.
“The moral of the story is, if the U.S. is entering a business, you’d better be ready to compete on cost,” Samir Kayande, director at Calgary-based RS Energy Group, told Bloomberg.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…