Opinion

Petronas considering abandoned Shell site for Pacific NorthWest LNG


Malaysia's Petronas is considering building its stalled Pacific NorthWest LNG export facility at the site of an abandoned Royal Dutch Shell LNG project in British Columbia, Canada.

In a March 31 interview quoted in international media, Petronas' CEO, Wan Zulkiflee Wan Ariffin, said Shell's Ridley Island site “could be one of the options” for Pacific NorthWest LNG, which is currently under internal review. His remarks came roughly two weeks after Shell announced that it would not proceed with the proposed Prince Rupert LNG project, which the super-major inherited as part of its 2016 acquisition of BG Group.

Pacific NorthWest LNG – which is estimated to cost C$36 billion (US$27 billion) in total, with the export terminal alone accounting for C$11.4 billion (US$8.5 billion) of this – was approved by Canada's government in September 2016. However, the project is still facing environmental and First Nation opposition, as well as economic hurdles. In December, the Petronas-led consortium behind the venture launched “a total project review” to consider cheaper options for building the facility, and has yet to confirm its final investment decision (FID).

In last week's interview, Wan Zulkiflee said the review had been launched so that “when we build the project, it will be a competitive LNG producer compared to the other North American producers”.

As part of the review, the Petronas-led consortium was already considering moving part of the Pacific NorthWest LNG facility to Ridley Island in an effort to address environmental concerns and eliminate the need for a C$1 billion (US$744 million) suspension bridge.

Pacific NorthWest LNG is considered the frontrunner out of the largest LNG projects that have been proposed for BC. But the global LNG supply glut that has led to prices falling in recent years is one of the factors delaying the project from reaching the FID stage.

Today, there are concerns that the economics of large-scale, multi-billion dollar Canadian LNG projects no longer add up because LNG prices are too low to justify the costs of production and exporting to Asia, the main market for the proposed ventures.

However, in last week's interview, Wan Zulkiflee suggested that neither Petronas nor its partners were in any rush to make an FID, and that they were taking a long-term approach. “This is really what I would call a generational decision,” he said. “It will really shape how Petronas will be as an LNG exporter in years to come.”

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