Petronas’ LNG project runs into further delay in Canada

KUALA LUMPUR: A major liquefied natural gas export project in Canada ran into another delay when the federal environmental assessment agency was granted an extra three months to finish an impact study.

Ottawa did though commit to announcing a final decision on the project this year, which would end a long-running saga for Malaysian oil giant Petronas.

The firm and its partners have been waiting nearly three years for a permit to build the Pacific NorthWest LNG facility in northern British Columbia, on the Pacific coast.

News of the latest delay broke on Saturday when Canada’s Environment Minister Catherine McKenna agreed to the Canadian Environmental Assessment Agency’s request (CEAA) for the extra three months.

The CEAA – which had been due to deliver its report to McKenna by March 22 – said it needed more data from the project’s backers after they handed over a series of documents and observations on March 4.

A spokesperson for McKenna said the Canadian cabinet would announce a decision three months after the backers had handed over the requested additional information.

The ambitious plan to build Canada’s first LNG export terminal faced challenges from the start, including controversy over its chosen site, which Canadian aboriginal and environment groups said would destroy a critical salmon habitat.

It is also the first major project to have an environmental assessment completed under new rules that include the impact of upstream production on project emissions.

A spokesman for Pacific NorthWest did not immediately respond to a request for comment.

Petronas, battling a profit-sapping slump in prices that could produce heavy losses, can ill afford to splurge on future supply.

But neither can it afford a lengthy and inconclusive process with authorities in Canada, where the project is seen as a test of Prime Minister Justin Trudeau’s green credentials.

Trudeau’s Liberals came to power last November promising to do a much better job of protecting the environment than the previous Conservative government.

But the Liberals, who say Canada must cut emissions of greenhouse gases, are also under pressure to push through approvals of projects in the energy sector, which is losing jobs due to the slump in oil and gas prices.

“The agency has requested additional information from the proponent in order to determine whether the project is likely to cause significant adverse environmental effects,” it said in the statement.

The request for more time to complete the impact study raises the prospect of more conditions on construction. This could simply make the project not economically enviable, analysts say, leaving Petronas to write off billions already invested.

For Petronas, the conditions have changed dramatically since it launched the project, long considered a front-runner among dozens proposed for British Columbia.

Gas prices are currently a quarter of 2014’s peak. Last month, Petronas cut jobs and announced some US$12bil in spending cuts over the next four years – the same sum analysts estimate it has sunk into the Canadian project.

Petronas is one of the country’s biggest employers and accounts for nearly a third of the Government’s oil and gas-related revenue.

The stakes are also high for Canada, which is seeking to kick start the local LNG industry, said Wood Mackenzie analyst Chong Zhi Xin, speaking before Saturday’s announcement.

But those ambitions come as Trudeau promises to transform Canada’s environmental image. If built, environmental campaigners say the Petronas project would tarnish that. – Reuters

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