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Petronas attaches cost to LNG project
Gary Park For Petroleum News
The race among Canada’s major LNG proponents to cross the finish line first has seen Malaysia’s Petronas and its Canadian unit Progress Energy step up its Pacific Northwest plan from a canter to a gallop.
Arif Mahmood, Petronas vice president of corporate planning, said June 11 the company will invest up to $16 billion to export 12 million metric tons a year from an LNG facility near Prince Rupert on the northern British Columbia coast, with an option to add another 6 million metric tons.
A regulatory application is expected to be filed later in June, setting the stage for an in-service date of late 2018.
In April, Pacific Northwest said it had signed an initial sales contract of 1.2 million metric tons a year with Japan Petroleum Exploration Co. in return for a 10 percent upstream stake in the project, while Petronas had previously agreed to use 6 million metric tons to meet its supply commitment to global customers.
Searching for partners A spokesman for Pacific Northwest said the search continues for other partners and more off-take deals are anticipated to cover 100 percent of the output before a final investment decision is made by late 2014.
Mahmood said the company will spend $9 billion-$11 billion to construct two liquefaction plants with capacity of 6 million metric tons a year each, and another $5 billion on a 450-mile pipeline to be built by TransCanada to supply 3.6 billion cubic feet per day of feedstock.
Talks are also taking place with five British Columbia First Nations as part of the scheduled environmental review process, with Pacific Northwest confident that the communities are “supportive” of the project.
The spokesman said the company is already producing 275 million cubic feet per day of gas, which is currently being sold to U.S. customers.
He said the capital costs are a vital element of the project economics, with current prices pointing to a cost of about C$1,000 to produce each ton of LNG, indicating a breakeven price of C$10-C$12 per million British thermal units.
Andy Flower, a principal consultant with Flower LNG, said LNG buyers are too obsessed with securing Henry Hub or AECO indexed prices, posing a challenge to secure commitments from Asian buyers.
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