Canadian Manufacturing

Petronas fires new threat to cancel $10B LNG project

Petronas said it may delay development for a decade unless it can reach cost and environmental agreements with provincial and federal governments this month



VICTORIA—A major player in British Columbia’s liquefied natural gas sweepstakes has rained on Premier Christy Clark’s throne speech, which laid out the government’s plans for the industry in the coming months.

Malaysian energy giant Petronas, which is planning a multibillion-dollar LNG export facility near Prince Rupert, B.C., chose the opening of B.C.’s legislature to issue a statement, saying it may delay development for a decade unless it can reach cost and environmental agreements with provincial and federal governments by month’s end.

Clark also rejected suggestions the government was downplaying its expectations for LNG because the throne speech did not mention past statements of creating 100,000 new jobs and eliminating the provincial debt, currently at more than $60 billion.

“This is a chance—not a windfall,” said the speech. “It will not be simply given to us, but achieved after a lot of hard work.”

Clark said at a news conference following the speech, which was 11 pages long and took less than 18 minutes to read, that she is focused on the job at hand, not repeating past promises about LNG and its benefits.

“I certainly hope they (Petronas) will be one of them,” she said. “It’s a very big project. Our goal out of 15 is to make sure we landed five. We’re government in a hurry and we want to make sure this happens.”

The statement issued by Petronas president Shamsul Abbas said “tax and high cost environment will negatively impact the project’s economic viability and competitiveness. In fact, in our last portfolio review exercise, the current project economics appeared marginal.”

Clark said talks between Petronas and the government are at the crunch point and she viewed the company’s statement as a negotiating tactic. She said she hoped the government and Petronas could reach a deal on the proposed Lelu Island LNG plant, but the development is one of more than a dozen currently in the planning stages.

“We are getting down to the short strokes of it,” she said. “The really hard part of it is coming right now, for both sides. What Petronas is doing is representing its shareholders. That is their job. My job is to represent the people of B.C.”

Opposition New Democrat Leader John Horgan said he is concerned the Liberals are about to backtrack on their predictions of LNG riches. He said he also has concerns that British Columbians are being kept in the dark about the government’s negotiations about a tax structure that could impact their futures.

“The important thing here is what’s the return to the people of B.C.,” he said. “What concerns me is Petronas knows more about this framework than the people of B.C.”

The throne speech, read by Lt.-Gov. Judith Guichon, said the LNG industry is an opportunity that represents a turning point for B.C., but success requires hard work.

“If we choose to do nothing, to maintain the status quo, we will have chosen decline,” said Guichon.

Guichon said the government will use this fall’s legislative session to move ahead with its framework to ensure the LNG industry benefits the owners of the resource—the people of British Columbia.

Clark said the government will table legislation in the coming weeks that includes a tax and environmental structure for LNG.

“The centrepiece of it is bringing in the full tax structure that will be required to bring in an LNG industry,” she said. “I felt today was really important to get down to the business of what we’re going to do in this session. Get on with it.”

Last February, Finance Minister Mike de Jong introduced a proposed two-tiered LNG Income Tax that called for an initial tax of 1.5 per cent at the start up phase and a tax of up to seven per cent once production was underway.

Clark and de Jong have since said the seven per cent number was open to discussion.

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