Malaysian state oil company Petronas is denying reports that it threatened to cancel its $36-billion Pacific NorthWest liquefied natural gas (LNG) project in British Columbia if it doesn’t receive federal government approval by March 31.
Meanwhile, The Wilderness Committee has launched a letter-writing campaign urging the Canadian Environment Assessment Agency (CEEA) and Environment and Climate Change Minister Catherine McKenna to “save the climate and reject the Pacific NorthWest LNG terminal.”
In an emailed statement Tuesday, Pacific NorthWest President Mike Culbert said the company “remains committed to the environmental process, including the new measures on upstream greenhouse gas emissions,” Reuters reports. But a day earlier, the Financial Post carried the new that Petronas “is frustrated that Prime Minister Justin Trudeau’s climate change priorities are introducing new uncertainty for its proposed $36-billion Pacific NorthWest LNG project in northern British Columbia and has threatened to walk away,” citing a source close to the project.
The proposed terminal “received a largely favourable assessment” from the CEAA last month, “was greenlighted by the British Columbia government in November 2014, and received conditional corporate support—or a final investment decision—from Malaysia’s state-owned company and its partners in June of last year,” the Post noted. But after the federal government introduced its new climate test for energy megaprojects in late January, a CEEA official said the agency would have to look into the implications for Pacific NorthWest.
“After spending an estimated $12 billion to get the project to this stage, and having suffered multiple delays and setbacks, including Aboriginal and environmental movement opposition, Petronas has conveyed to federal cabinet ministers it won’t accept additional hurdles,” the Post reported.
“They have given Trudeau to March 31 to either approve it as it stands now or they are going to leave,” the Post’s in-house source claimed. “They started off with the Conservatives, and the standards are very high. They said, okay, we will meet those standards and they did, in all the engineering and design of the project. This last greenhouse gas thing that Trudeau came up with really threw them for a loop.”
The highly controversial Pacific NorthWest project has lurched from one crisis to another in recent months, with the Lax Kw’alaams First Nation rejecting a $1-billion deal to support it and scientists warning that the proposed LNG terminal on Lulu Island could severely damage the most critical salmon spawning habitat in British Columbia’s Skeena estuary.
But in a global LNG industry that “now resembles a game of ‘musical chairs’ with far more projects than the market can absorb,” according to Tokyo-based IHS analyst James Taverner, Petronas may have its own reasons to cut its losses. In January, the company announced it would reduce spending by US$11.4 billion over the next four years and slash its 2016 dividend by 40%, following a 91% drop in profits due to falling oil prices.
“This means that we are going to have to defer some of our projects,” CEO Wan Zulkiflee Wan Ariffin said in a January 18 memo.
In mid-February, the Malaysia Chronicle reported that Petronas was “expected to announce some significant measures to reduce the operational expenditure” at a town hall March 4. “Sources say among options that may come out is a pay cut among senior management of the national oil company. Another possibility is a reduction in the number of working days for some employees. Previously, Petronas’ management have denied contemplating the laying off of employees. It is unclear if this is still the case today.”
In mid-October, IHS’ Taverner pointed to “a very narrow window of opportunity for new projects that want to take final investment decisions by 2020.” Brookings Institution energy and climate analyst Tim Boersma added that “it will be increasingly difficult to convince financial institutions to put major sums of money on the table to construct additional capacity.”
