Canadian Manufacturing

$36B Petronas LNG export facility on B.C. coast moves closer to reality

Malaysian energy giant Petronas signed a memorandum of understanding with B.C. that could lead to a project-development agreement

May 21, 2015   by Dirk Meissner, The Canadian Press

VICTORIA—Plans to build a $36-billion liquefied natural gas export facility on British Columbia’s northwest coast moved forward May 20, although there’s no green light yet signalling the project’s official start.

The B.C. government and Malaysian energy giant Petronas signed a memorandum of understanding that could lead to a project-development agreement and eventually the construction of an LNG plant at Lelu Island near Prince Rupert.

Premier Christy Clark said once Petronas-controlled Pacific NorthWest LNG secures project approval from its backers, she will recall the legislature to adopt legislation for the project, which would be the largest capital investment in B.C.’s history.

Government sources suggest that legislation could be introduced as early as this summer.


“These agreements set the stage for a potential $36-billion investment in northern B.C.,” Clark said at a Vancouver news conference. “It will be a key driver of jobs in every corner of our province.”

Clark said B.C. has cleared a path for LNG development by introducing competitive tax programs, skills-training initiatives, environmental controls and First Nations’ participation.

But she said the final decision still rests with the company, which faces its own economic, environmental and First Nations’ issues.

Michael Culbert, president of Pacific NorthWest LNG, said work that’s still ahead includes negotiations with First Nations and environmental approval from the federal government, but B.C. has offered stability and predictability.

“While we know there is much heavy lifting to be done, including the conclusion of the rigorous environmental assessment being conducted by the government of Canada, this is a good day for stability and clarity and predictability,” he said.

Last May, B.C. and Petronas signed a letter of intent to work towards securing long-term investments in LNG in B.C. Included in the letter were Petronas’ requests for cost certainty from the government. The government called on Petronas to work towards a final investment decision.

Clark has frequently touted B.C.’s plans to develop LNG export terminals as a generational opportunity worth up to a trillion dollars, with the potential to create 100,000 jobs.

She said there are currently 19 proposals for LNG projects in B.C.

Clark said the government amended legislation this year that secures long-term royalty agreements and stabilizes rates for Petronas.

The royalty rates, which are pre set annually, start at just above six per cent and rise to 13.36 per cent, earning the province an estimated $7.7 billion over the project’s proposed 23-year life.

Opposition New Democrat Leader John Horgan said Clark appears to be working to please Petronas, while leaving scraps for British Columbians in her effort to secure the LNG deal.

“There’s no set job guarantees in this document,” he said. “There’s no clear understanding of what return to taxpayers is going to be in the long term.”

Federal Industry Minister James Moore called the proposed project a massive opportunity for the province.

“This is an important moment for Canada, for British Columbia,” he said, noting the federal government wants Petronas to say yes to the project.