Malaysia's Petronas to invest $20 bn in Canadian LNG project

Malaysian national oil company Petronas has disclosed plans to invest approximately $20 billion on a new liquefied natural gas (LNG) export facility in British Columbia (BC) in western Canada.

 
Petronas Twin Towers, Kuala Lumpur.

The proposed Pacific Northwest LNG project located on Lelu Island in the Port Edward district will liquify and export natural gas produced by Progress Energy Canada's gas fields in Montney region in BC and northwest Alberta, targeting energy starving Asian nations.

Petronas acquired Progress Energy in December 2012 for $5.2 billion in a in a high-profile transaction that had been initially blocked by the Canadian government.

The company's vice president Arif Mahmood said at an industry conference that the company will invest between $9 billion and $11 billion to build the two liquefaction plants.

The project will have two LNG trains, each with a capacity of $6 million tonnes per year, which are expected to become operational by 2019.

Another $5 billion will be invested on a 750-km pipeline, which will be constructed by TransCanada Corp to supply natural gas from the production fields to the two plants.

The remainder of the amount is expected to be spent on developing upstream gas reserves.

There is space to build a third train and the capacity could go up to 18 million tonnes per year, Mahmood said.

However, a final investment decision on the project has not been taken yet and is not expected before the end of 2014.

The company is in talks with several parties to sell up to 50-per cent of its stake in the Canadian LNG project.

''We are talking to several possible partners as we want to share our project risk. We are hoping to have our final investment decisions by the end of next year," Petronas vice president global LNG Adnal Zainal Abidin told reporters on the sidelines of the 17th Asia oil and gas conference in Kuala Lumpur yesterday.

Petronas has already completed the sale of a 10-per cent interest in the project to Japan Petroleum Exploration Co, securing a long-term customer for the LNG produced in Canada.

Mahmood said although there was no preference whether the buyers are independent oil companies or state-owned enterprises, but chances are that potential partners would come from the latter who are users of gas and not resellers.

"What we're looking for is actually potential partners where they will also be offtakers of the gas," Mahmood said adding that Petronas will own at least 50 percent of the project.

Petronas is one of the several energy giants looking to develop rich North American gas resources in remote regions to meet the energy demand of growing Asian economies.

Royal Dutch Shell along with Asian partners Mitsubishi, Korea Gas and PetroChina, plans to develop an LNG facility in Kitmat, about 200 km from the Petronas location while Chevron and Apache Corp have a 50:50 joint venture project, also in Kitmat.