Petronas launches engineering work for B.C. LNG project

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Malaysian energy giant Petronas has begun early engineering work for a massive British Columbia natural gas export project, and is weeks away from applying to send energy offshore and build a pipeline to the West Coast.

On Tuesday, Petronas said it had contracted three engineering consortia for front-end engineering and design of its Pacific NorthWest LNG project, which the company hopes to build in Prince Rupert, B.C.

The contract is "the next step in the process towards final investment decision," said Greg Kist, president of Pacific NorthWest LNG Ltd., the Petronas subsidiary building the project. "This is really the technical phase of the project being carried out," he said.

Petronas is one of a large group of giant energy companies pursuing hugely expensive plans to liquefy Canadian natural gas and load it on tankers bound for Asia. The company got its start later than some of its rivals, but said Tuesday it is pressing forward on several fronts. It expects to apply to the National Energy Board for a natural gas export permit in the next month; TransCanada Corp., which has agreed to build a pipeline to the coast, expects to submit an application for that project by the end of next week.

Petronas also continues to talk with other potential partners about selling off up to half of its project, in deals expected to be similar to one that saw it give up 10 per cent to Japan Petroleum Exploration last month, for an undisclosed sum.

"We have all the pieces coming together to have a successful project," Mr. Kist said. Petronas hopes to make a final investment decision by late 2014, and begin exports by 2018.

However, many observers expect only a minority of planned LNG projects to be built. Those interested in the Prince Rupert area, like Petronas, face First Nations hurdles, with numerous overlapping claims to federal port lands there. Cost and complexity are also major issues in designing facilities that could cost tens of billions of dollars. Australia's booming LNG industry has seen enormous cost overruns, for example.

For its Canadian project, Petronas contracted Bechtel; joint ventures made up of KBR and JGC; and Technip, Samsung Engineering and China Huanqiu.

Petronas says it hopes to promote better Canadian expertise in designing natural gas export projects as it launches the process, by hiring 30 engineers it will second to those companies before bringing them back to Canada.

"This is really about building capacity that doesn't exist today in a large way in Canada," Mr. Kist said.

The creation of so-called net benefits is a key checkmark for foreign companies seeking Ottawa's approval for acquisitions of Canadian companies.