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Global Energy Advisory 13th October 2017

Tensions between Iran and the…

Canadian-Malaysian LNG Terminal Project To Begin This Year

Canadian-Malaysian LNG Terminal Project To Begin This Year

A group formed by the Malaysian energy company Petronas is all but certain to begin building a US$36 billion liquid natural gas (LNG) export terminal on Canada’s Pacific coast by year’s end, according to British Columbia’s finance minister, Michael de Jong.

“The construction will begin soon ... this fall, de Jong said July 27 at a press briefing in Putrajaya, Malaysia, after meeting with the country’s prime minister, Datuk Seri Najib Tun Razak. “All other prerequisites have been dealt with.”

All other prerequisites except for one, actually. De Jong said the deal still needs the formal environmental blessing of Canada’s federal government. “Our central government environmental certificate is the remaining piece to this, and we are working through that exercise,” he said. “We are optimistic that in the very near future it will be concluded.”

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Malaysia has assembled a consortium of companies from Brunei, China, India and Japan to build the project, called Pacific NorthWest LNG, once it receives final clearance. The terminal, to be constructed on Lelu Island near Prince Rupert, will include facilities to process and export gas produced by Progress Energy Canada Ltd.

“This will be Malaysian technology partnering a Canadian company to access resource that we have in abundance to the rest of the world,” de Jong said.

De Jong’s trip to Malaysia came after British Columbia’s Legislature, controlled by Canada’s Liberal Party, passed a bill on July 21 clearing the way for the Pacific NorthWest LNG project, a measure necessary for the provincial government to do business with the consortium.

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The measure was opposed by New Democratic Party (NDP), which argued that the construction plans include no provisions guaranteeing jobs for Canadian workers and sacrifices some future tax revenues.
The Canadian legislation will compensate Pacific NorthWest by C$25 million per year or more if a future government raised the tax rates for its LNG operations, added carbon taxes, reduced credits for producing gas and make costly changes to rules on greenhouse gas emissions.

During debate on the issue, de Jong called the plan the largest single private investment in British Columbia’s history. He estimated that if approved, it would contribute more than C$9 billion to the B.C. treasury over 25 years and create 4,500 new jobs.

NDP leader John Horgan countered that the project would require an estimated 70 percent of foreign workers to complete. And some green groups argued that the deal would make the province’s environmental policies so rigid that they couldn’t be changed as needed.

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But in Malaysia, de Jong said the project has wide support not only in British Columbia but also throughout Canada because it promotes a cleaner-burning fuel as a viable alternative to oil and coal, which emit significantly more greenhouse gases than LNG.

And he said Pacific NorthWest LNG would generate increased trade between Canada and Malaysia, which would benefit both countries.

“The advent of this project will immediately elevate Malaysia to number two [as Canada’s trading partner] from its current position at number four,” de Jong said. “Because of the leading role Malaysia has taken in respect of the development of LNG here, I am convinced we will see spin-off effects.”

By Andy Tully of Oilprice.com

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