Petronas May Delay Canadian LNG Project
Global gas glut may push back planned 2019 start of commercial operations for $27.5 billion Pacific NorthWest project
(2016-08-02 08:33:13) dawei KUALA LUMPUR, Malaysia—Malaysia’s state oil company is considering delaying a Canadian liquefied-natural gas project over concerns about oversupply and cheap competing fuels, according to two people familiar with the matter.
Petroliam Nasional Bhd., known as Petronas, so far has put up roughly a third of the estimated $27.5 billion cost of the Pacific NorthWest LNG project in British Columbia, which will liquefy and export natural gas. The plan has been to begin commercial operations in 2019, according to the Pacific NorthWest website.
The Canadian government is weighing approval. The next step would be for Petronas and its partners—Brunei National Petroleum Co., China Petroleum & Chemical Corp., Indian Oil Corp. and Japan Petroleum Exploration Co.—to confirm the final investment decision.
In calculating the project-price estimate, Petronas said it included what it paid in 2012 for Calgary-based Progress Energy Resources Corp. which will produce the gas, as well as the cost of the proposed two liquefaction plants, marine terminal, pipeline and storage tanks.
People familiar with the matter told The Wall Street Journal that the oversupply of LNG and lower oil and gas prices have rendered the project unattractive at the moment. They declined to say how long the delay might be.
Other companies have already pushed back big LNG plans. Anglo-Dutch giant Royal Dutch ShellPLC last week said it was deferring a final investment decision on an export facility in Lake Charles, Louisiana, after earlier in July doing the same for an export project in Kitimat, British Columbia.
LNG prices have been softening since 2014 as demand has weakened, and over the next five years new supply from Australia, the U.S. and Russia is set to hit the market. Although Asian spot LNG prices climbed last week, driven by new demand from Argentina, falling crude-oil prices—down more than 20% since early June—may weigh on them going forward.
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