PETROLIAM Nasional Bhd (Petronas) will make a final investment decision (FID) on a project to build a multi-billion-ringgit liquefied natural gas (LNG) export terminal in British Columbia, Canada, by June this year.
However, president and chief executive officer Tan Sri Shamsul Azhar Abbas has alluded that the national oil company would pursue the development as it has received what it wanted from the Government and was waiting for further approvals.
“The issues outstanding with the local provincial government and the Canadian government have been resolved. The capital allowance will be given, which will further improve the economics of the project,” he said yesterday.
Shamsul said that the FID was in June because the Environmental Impact Assessment report would only be out in April.
“We have until June to make a decision. There is no hurry,” he said.
He also dismissed speculation that Petronas was considering walking out of the project because of the economics.
“Enough of such speculation …we can wait until the end of June and still complete it within time,” he reiterated.
Petronas will be re-bidding the tenders for the job to build the LNG plant because cost has come down with the decline in oil and gas prices.
“We have aborted the bidding process so that we can call for fresh bids. The prices have come down,” he said.
Last year, Petronas had wanted to walk away from building the US$32bil project called the Pacific Northwest LNG export facility because of tax laws that were seen as prohibiting and unwelcoming of foreign investments into the sector.
The British Columbia tax system entails a small upfront tax rate that escalates as the project begins to pay dividends. Politicians see the tax regime as one that could earn the British Columbia government billions from the business of facilitating the export of LNG.
However, it has been reported that the problem was that the economics of the project were already marginal and a restrictive tax regime would make it uneconomical. To compound further the problem was that demand for LNG was weak.
Market conditions put pressure on the British Columbia government, which has since relented.
Shamsul also said that Petronas would be disposing up to a 12% stake in the LNG project to a China company, as it seeks to reduce its stake to about 50%.
So far, it has already divested 38% to parties that include Indian Oil Corp, Japan Petroleum Exploration Co and Brunei National Petroleum Co.
The LNG terminal is part of Petronas’ foray into Canada where it also acquired Progress Energy Resources Corp in 2012 that gave it vast acreage to produce shale gas, while the proposed LNG terminal and a pipeline would complete its exports.