Petronas Nixes the Pacific Northwest LNG Megaproject

Petronas and its partners are not going to proceed with the proposed USD 28-billion Pacific Northwest LNG project at Port Edward, British Columbia, Canada. Petronas is the majority owner and partners include Japan Petroleum Exploration Co., China Petroleum and Chemical Corp. (Sinopec), Indian Oil Corp., and Brunei National Petroleum Co.

Petronas’ Executive Vice President and CEO Upstream, Anuar Taib, said, “We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision.” The prolonged period of low LNG prices factored in the decision.


The regulatory approvals have been a long time coming. In February 2013, the project description was submitted to the Canadian Environmental Assessment Agency (CEAA). A year later, the Canadian National Energy Board granted a license to export up to 22 million tonnes per annum (MTPA) of LNG annually for 25 years. In March 2016, the government granted the CEAA more time to review the project, but in September 2016, the government approved the project with 190 conditions with an addition of a maximum cap on greenhouse gas emissions.

Described as an integrated unconventional-shale-gas-to-LNG project, natural gas produced by Progress Energy Canada in northeastern British Columbia was to be liquefied and exported to countries in Asia. A proposed export terminal and the 900-km Prince Rupert Gas Transmission pipeline project, which would be built, owned, and operated by TransCanada, were included in the plans.

The pipeline was to take natural gas from the Montney formation to the proposed liquefaction facility. The facility was to initially include two LNG trains of approximately 6 MTPA each, and a subsequent development of a third train of approximately 6 MTPA.

TransCanada's Prince Rupert gas pipeline may also be affected by the cancellation. The project was recently delayed as the National Energy Board was ordered by a federal court to reconsider provincial approval.

The project had already seen a hefty infusion of funding. Reuters reported that Petronas said it had made significant investments in the project along with its partners over the past 5 years, but declined to give a figure. The Malaysian state-owned firm took over Progress Energy in 2012 for USD 6 billion with the intent of increasing the availability of natural gas for the Pacific Northwest LNG project. TransCanada said it would be reimbursed for costs associated with the project, according to Reuters. It had spent CAD 500 million as of April. Japan Petroleum Exploration Co. said it would take a loss of about CAD 102 million.



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