Petronas curbs LNG production in Canada

PETALING JAYA: Petroliam Nasional Bhd (Petronas), which has a 25% stake in the C$40bil (RM123bil) LNG Canada project, has been curtailing production by between 50 and 200 million cubic feet per day (cf/d) due to low liquified natural gas (LNG) prices.

According to a report by The Canadian Press, the wells in northeastern British Columbia are capable of producing 700 million cf/d of LNG.

Quoting Petronas Energy Canada Ltd (PECL) chief executive officer Mark Fitzgerald, it said the practice is one being adopted by a growing number of western Canadian producers to avoid selling their natural gas at prices that often don’t even cover the cost of pipeline transportation.

“We talk a lot about oil infrastructure.

“Gas is trapped as well and if you compare the prices that Canadian gas producers are receiving against our US peers, the differentials are significant and costing us a significant amount of money,” Fitzgerald was quoted as saying.

The Canadian Press said PECL invested heavily in natural gas exploration in northeastern British Columbia from 2012 to 2016, employing more than 25 drilling rigs at peak times to prove the resource potential as part of its longer-term plan to build a liquefied natural gas export terminal.

The company is running only one rig now.

Quoting Ian Archer, an associate director with IHS Markit, The Canadian Press reported that LNG Canada’s first phase is expected to require about two billion cf/d of gas to produce about 14 million tonnes per year of LNG, but most of that gas is expected to come from the partners.

Petronas joined the LNG Canada partnership led by Royal Dutch Shell in May.

This is an about-turn of event for the national oil and gas company, which in July 2017 scrapped plans to invest in the C$36bil (RM111.5bil) Pacific NorthWest LNG gas pipeline project in British Columbia, Canada, due to prolonged depressed prices and unfavourable market conditions for the energy industry then. The proposed LNG Canada project would include the design, construction and operation of a gas liquefaction plant and facilities for the storage and export of LNG, including marine facilities.

The plant would initially consist of two world-scale LNG processing units referred to as “trains”, with an option to expand the project in the future to four trains.

Upon signing the deal with Shell, Petronas said having an equity position in the project would enhance its business intent to develop its world-class natural gas resources in the North Montney, northeast British Columbia, through its wholly-owned subsidiary, Progress Energy Canada Ltd.

Canada is Petronas’ second largest resource holder after Malaysia, with vast unconventional gas and oil resources in the North Montney. Petronas and its North Montney joint-venture partners are one of the largest natural gas resource owners in Canada with over 52 trillion cu ft of reserves and contingent resources.

Oil & Gas , Petronas , LNG , Canada