B.C.’s LNG future facing hurdles

Petroliam Nasional Bhd., Malaysia’s state oil company, which is facing unprecedented losses

wants the Canadian government to make a decision by October on the liquified natural gas (LNG) export project that the firm plans to undertake in British Columbia.

To be built along with partners from China, Japan, India, and Brunei, the project is expected to cost C$36 billion, and is key to B.C.’s LNG-fuelled economic future.

Construction was originally scheduled to start in 2015, but the approval has been mired over concerns about the impact on fish, wildlife and the traditional ways of life of First Nation tribes in the region.

Petronas is also frustrated that Prime Minister Justin Trudeau’s climate-change priorities

is toughening up environmental reviews of major energy projects which could impose

additional assessments on the project.

Sources in Malaysia said Petronas has conveyed to federal cabinet ministers it won’t accept additional hurdles, after spending an estimated $12 billion to get the project to this stage.

“We are still waiting for a final decision by Canadian authorities. Until we get their final decision, we are not able to decide (whether to proceed),” Petronas CEO Wan Zulkiflee Wan Ariffin told reporters after a media briefing on Petronas’ latest financial results in Kuala Lumpur.

He added that the national oil and gas company estimates to hear from the Canadian government around September or October.

Wan Zulkiflee said that Petronas and its partners have to review the whole project after looking at the decision of Canadian authorities and the conditions that come with it.

Over the past three years, plummeting crude oil prices had significantly reduced Petronas’ revenue base, leading to reports that they may pull out of the project.

In March, the Canadian Environmental Assessment Agency requested for three extra months to finish an impact study regarding the project.

The project would be Canada’s first LNG export terminal, but the plan has received opposition from environmental and aboriginal groups who have said that it would destroy a critical salmon habitat.

Earlier this year, Petronas laid off some 1,000 employees as dropping crude oil prices resulted in falling revenues for the national oil and gas company.

Petroliam Nasional Bhd., Malaysia’s state oil company, said profit dropped 96 percent last quarter after it was hit by oil prices that remained sharply lower than a year earlier.

Net income fell to 348 million ringgit ($86 million) in the three months through June, from 9.1 billion ringgit a year ago, the company said Monday. Revenue slid 21 percent to 48.4 billion ringgit.

“The first half of 2016 remained difficult for Petronas,” Chief Executive Officer Wan Zulkiflee Wan Ariffin told reporters in Kuala Lumpur. “The continuous volatility of oil prices means that we cannot let up, but instead continue to grow on the back of better operational efficiencies, more controllable” spending on operations, he said.

Petronas, as the company is known, said earlier this year a change in its business structure will result in the loss of about 1,000 jobs, joining global oil majors including Royal Dutch Shell Plc in cutting spending as crude prices fell. It had about 51,000 workers at the end of 2014. The company will focus on non-performers for any further headcount reductions, without aiming for a specific target, Wan Zulkiflee said.

This week, Petronas said profit dropped 96 percent last quarter after it was hit by oil prices that remained sharply lower than a year earlier.

Net income fell to 348 million ringgit ($86 million) in the three months through June, from 9.1 billion ringgit a year ago, the company said Monday. Revenue slid 21 percent to 48.4 billion ringgit.

Petronas is planning to lower capital and operating expenditure by as much as 20 billion ringgit in 2016, with a planned reduction of 50 billion ringgit over four years, Wan Zulkiflee said in February.

Brent crude, the global benchmark, averaged almost $47 a barrel in the second quarter, compared with about $63 during the same period last year. Petronas is sticking with its assumption for Brent to average $30 a barrel in 2016 for budget-planning purposes, Wan Zulkiflee said. The average oil price this year is still lower than 2015, he said.

 

BC LNG Quick Facts

 

The integrated project, consisting of Pacific NorthWest LNG Ltd. and Progress Energy Canada Ltd. are majority owned by PETRONAS, Malaysia’s national energy company. Incorporated in 1974, PETRONAS is now one of the world’s largest, fully integrated oil and gas companies.

Pacific NorthWest LNG Ltd. and Progress Energy Canada Ltd. have secured four transaction agreements to date. These agreements have been reached with Japan Petroleum Exploration Company Ltd. (JAPEX), PetroleumBRUNEI, Indian Oil Corporation Ltd. and China Petrochemical Corporation (SINOPEC)

There are 13 proposed LNG projects in B.C., nine of which already have been approved for export licences from the National Energy Board.

If five of these proposed facilities move forward, the cumulative gross domestic product benefit to B.C. could total $1 trillion.

LNG export operations in B.C. could create over 100,000 new jobs in the province and new revenues for government to support a debt-free future.

At peak construction in 2018, the LNG sector will require 58,700 workers.

The Province recently unveiled a comprehensive strategy - B.C.'s Skills for Jobs Blueprint - to help meet LNG workforce challenges and ensure that apprenticeships, education and training are more in line with labour market demands.

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