Petronas is said near investment in US$31bil Canada project

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is nearing a deal to invest in a proposed US$31 bil liquefied natural gas project in Canada led by Royal Dutch Shell Plc, according to people with knowledge of negotiations.

An announcement may come as soon as Thursday, said one of the people, who asked not to be identified because the talks are private. The LNG Canada project, in northern British Columbia, is led by Shell and partners Mitsubishi Corp, PetroChina Co. and Korea Gas Corp.

LNG Canada executives weren’t immediately available for comment. Representatives for Petronas and Shell didn’t immediately respond to requests for comment.

A deal would mark a turnaround by Petronas after it abandoned its own US$27bil LNG proposal in the western Canadian province last July after the project faced spiraling costs and staunch opposition from environmental and indigenous groups. That decision left it without a plan to ship gas produced by its Progress Energy Canada unit to Asia as originally intended.

Buying into the Shell-led project would help revive that prospect. LNG Canada plans to build an export facility at Kitimat near Prince Rupert -- North America’s closest port to Asia -- that could eventually reach 26 million tons a year in capacity.

Petronas’s involvement would also help bring financing and gas supplies to LNG Canada as the group nears a final investment decision, expected this year. Petronas’s Progress unit could contribute an additional 560 million cubic feet a day of production to the project, meaning it would have all the gas it needs to meet its initial export target, according to National Bank of Canada analyst Greg Colman.

Shell and its partners have twice delayed a final investment decision on the project amid a global supply glut. But in recent months, Shell has indicated the window for competitive projects may be reopening, saying that global LNG demand exceeded expectations last year and that the market may again face a supply shortage by the mid-2020s.

“It is looking very, very positive for this project,” Karl Johannson, head of Canada and Mexico natural gas pipelines for TransCanada Corp, which is set to build the pipeline to deliver gas to the export facility, said on an investor call in April. - Bloomberg





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