Petronas enters LNG Canada

31 May 2018, Week 21, Issue 510

Petronas has acquired a 25% stake in the Royal Dutch Shell-backed LNG Canada project, in British Columbia, just under a year after ending its own export plan, Pacific NorthWest LNG.  

Shell Canada Energy announced the entry of Petronas to LNG Canada, in Kitimat, on May 31. Petronas will take its 25% stake in the project via the North Montney LNG Limited Partnership (NMLLP). Shell will keep a 40% stake in the development, while PetroChina Canada and Mitsubishi will have 15% each and South Korea’s Kogas Canada 5%. The companies did not reveal on what basis Petronas had acquired its 25% share. 

The deal sees Shell reducing its stake by 10%, PetroChina by 5% and Kogas by 10%. Mitsubishi retains an unchanged interest. The deal with Petronas is subject to regulatory approvals, with the Malaysian company saying it should be completed in the next few months. 

“Petronas is in Canada for the long term and we are exploring a number of business opportunities that will allow us to increase our production and accelerate the monetisation of our world-class resources in the North Montney. LNG is just one of those opportunities,” said the company’s president and CEO, Tan Sri Wan Zulkiflee Wan Ariffin.

LNG Canada recently chose a joint venture made up of JGC and Fluor to act as the engineering, procurement and construction (EPC) contractor. The statement remained cautious on a final investment decision (FID), though, saying this deal did not amount to such a decision, which would take place based on factors such as overall competiveness and affordability. 

Fluor, on accepting the EPC work in April this year, said the award was conditional on a positive FID “later this year”. 

LNG Canada would involve the construction of two trains, producing 6.5 million tpy each, with the potential to expand to four trains in future. Costs have been estimated at about US$31 billion. Pacific NorthWest LNG would have cost around US$27 billion. 

 

No progress

Petronas announced its decision to drop the Pacific NorthWest LNG project in July 2017, blaming the decision on “changes in market conditions” and saying that the environment was “extremely challenging”. While the company opted not to go ahead with this project, Petronas – via its acquisition of Progress Energy – has a major gas holding in the Montney shale, in northeast BC. 

Speaking in October, Zulkiflee Wan Ariffin said prices were insufficient to encourage new investments in liquefaction. Since 2017, though, the mood has changed, buoyed by surprisingly strong demand from China. In May, Cheniere Energy decided to press ahead with a third train at its Corpus Christi development. 

The Malaysian company said the stake in LNG Canada would allow it to develop its Montney resources, which make up Petronas’ second largest resource – after Malaysia. The shale holds 52 tcf (1.47 tcm) of reserves and contingent resources, it said. 

On May 23, Canada’s National Energy Board (NEB) announced the approval for a pipeline from the North Montney that was to have fed the Pacific NorthWest LNG plant, via the proposed Prince Rupert Gas Transmission Line. The NEB said that, despite the cancellation of the LNG plant, Montney producers had asked for additional export capacity and that such a link was economically viable. 

In addition to its tradition of LNG work, Petronas also recently sold a cargo via an online trading platform, GLX, for the first time, saying it had secured a “competitive price”. Petronas has domestic liquefaction projects, at Bintulu and offshore Sarawak, in addition to Australia’s Gladstone. 

 

Edited by

Anna Kachkova

Editor

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