Natural Gas Development Minister Rich Coleman (left) and Premier Christy Clark tour Petronas gas import facilities in Malaysia in May.

Petronas gives deadline for LNG deal

Malaysian investors warn of lower gas price, high cost and regulation as B.C. prepares tax on LNG exports

Malaysia’s state-owned energy company has issued another public warning to the B.C. government that it could push back its investment in liquefied natural gas by 10 or 15 years.

Petronas CEO Shamsul Azhar Abbas issued a statement Monday describing a softening global market for natural gas and oil, and renewing criticisms made public in September about Canada’s tax and environment rules.

The latest shot across the bow from the leader of B.C.’s largest LNG project comes as the B.C. legislature meets for a rare fall session. The government’s main business in the two-month sitting is to authorize a provincial tax on LNG exports in addition to the royalties paid to the province for gas from northeastern B.C.

“The proposed fiscal package and regulatory pace in Canada threatens the global competitiveness of the Pacific Northwest LNG project,” Abbas said. “This is further exacerbated by preliminary project costs, which indicates cost of local contractors to be higher and not benchmarked to global contractor’s cost.”

Premier Christy Clark and Natural Gas Development Minister Rich Coleman met with Petronas last week and agreed to have the tax arrangements completed by the end of October, allowing an investment decision by the end of the year.

The consortium led by Petronas also has to pass provincial environment assessment, including air pollution limits on its gas-fired LNG compressors.

The project has marine impacts from its proposed terminal on Lelu Island near Prince Rupert, which requires approval of Fisheries and Oceans Canada for its effect on salmon and ocean habitat.

Petronas is leading a consortium that includes Chinese, Japanese, Indian and Brunei investors for a pipeline and LNG processing in northern B.C. Petronas paid $5 billion last year to take over Progress Energy Canada, which has major shale gas holdings in northeast B.C. and Alberta.

 

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