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LNG project caught in storm Speculation swirls around Pacific NorthWest; claim Petronas on brink of walking; BC government, consortium do ‘business as usual’ GARY PARK For Petroleum News
The biggest and best hope for a large-scale LNG project in British Columbia finds itself being sucked into a deepening quagmire, dominated by disagreement over whether operator Petronas has threatened to walk away unless it gets Canadian government approval by March 31.
The Financial Post quoted an unidentified source as saying the Malaysian company has insisted the administration of Prime Minister Justin Trudeau accept the proposal is it now stands and abandon thoughts of imposing on Pacific NorthWest any revised environmental reviews or carbon-tax measures the government may introduce.
The newspaper said Pacific NorthWest feels it has already met “very high” environmental standards, based on which it has completed engineering and design work.
Now the prospect of federal climate-change legislation, including a carbon tax, has thrown the proponents “for a loop,” the source said, adding that further delays by the Canadian government will only force the consortium (Petronas, China’s Sinopec, Japan Petroleum Exploration Co., India Oil Corp and Petroleum Brunei) to spend even more money.
Only speculation But the British Columbia government and Pacific NorthWest have tossed cold water on the speculation.
The project President Michael Culbert told Postmedia News that reports of an ultimatum are false, while British Columbia Natural Gas Development Minister Rich Coleman said it is “business as usual” for the proponent.
Premier Christy Clark chimed in by reporting that Petronas is “very satisfied with the way the federal government is going on this. So I think perhaps the report (of a walkout) is incorrect.”
The consortium has so far spent about C$12 billion of a projected C$36 billion, of which Petronas spent about C$6 billion to acquire Progress Energy and secure natural gas supplies in northeastern British Columbia. Another C$2 billion a year was invested by the partnership from 2013 through 2015 on gas exploration and development.
Challenges piling up Even so the challenges confronting the partnership keep piling up, with about 130 scientists asking Trudeau and federal Environment Minister Catherine McKenna to reject a “scientifically flawed” report on the project.
In a letter, the scientists said “a worse location (for an export terminal near Prince Rupert) is unlikely to be found ... with regards to potential risks to fish and fisheries.”
“We urge you to reject” a draft report by the Canadian Environmental Assessment Agency said the letter to Trudeau, McKenna and three other federal cabinet ministers.
The letter said the CEAA failed to “adequately consider decades of scientific research on salmon in the Skeena River estuary and instead relied on proponent-funded studies that were substantially more limited in scope and duration and that reached different conclusions compared to the larger body of available science.”
In January, McKenna said the government would examine what impact Pacific NorthWest might have on greenhouse gas emissions from the production of natural gas needed as LNG feedstock.
But she said that process should not prevent a decision by March 22.
Comments growing However, since the CEAA invited responses to its draft report released on Feb. 10 it has seen public comments soar to more than 10,000.
A spokesman for McKenna said those comments will be part of a review of direct and upstream greenhouse gas emissions linked to the project.
CEAA issued a statement defending its work and noting that the government is “committed to conducting high-quality, thorough and science-based environmental assessments that are fair, transparent and that take into account the views of Canadians and indigenous peoples.”
It also said that if the project gets a green light to enter the permitting phase, mitigation measures to protect salmon habitat “would be developed into legally binding conditions.”
However, the agency conceded that its draft report has concluded that greenhouse gas emissions from upstream activities would be “high in magnitude, continuous, irreversible and global in extent,” rejecting Pacific NorthWest’s submission that the Canadian climate impact would be largely offset by the use of LNG to replace coal and diesel in Asia as outside its scope.
Culbert said in a statement the consortium looks forward to an ultimate decision by the government “in due course.”
On the report that Petronas has issued a threat to abandon the venture, the company referred to comments made Feb. 29 by Petronas Chief Executive Officer Datuk Wan Zulkiflee Wan Ariffin that the partners “continue to work towards achieving a full” final investment decision.
The Financial Post reported that Culbert has distributed an email statement to supporters of Pacific NorthWest urging them to get family and friends to send letters to the CEAA.
In addition, pro-LNG groups such as Voices for Responsible Development and Canada’s Energy Citizens are prodding their supports to voice support for the project.
Revenues to government Lending some added weight to the project, a study by the Conference Board of Canada said that if the C$11.4 billion terminal near Prince Rupert is built the British Columbia government could collect about C$294 million in annual royalty from natural gas development over 30 years and C$85 million a year from an LNG tax.
In addition, Pacific NorthWest would generate a further C$79 million a year in corporate taxes for British Columbia and C$204 million in annual federal taxes, the board said.
“The construction of the Pacific NorthWest facility would allow Canada’s natural gas to reach markets characterized by growing demand, which would generate revenues and employment opportunities that would not otherwise exist,” the study said, estimating that 18,500 jobs would be created by the liquefaction and export terminal and related activities.
The board had earlier estimated that if three LNG projects are built they could increase Canada’s gross domestic product by C$7.4 billion a year over 30 years, including C$5.3 billion of growth within British Columbia, while 65,000 jobs would be created across Canada, 46,800 of them in British Columbia.
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