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B.C. plays down reports Petronas may ‘call off’ gas project

Malaysian energy giant Petronas is threatening to walk away from a $10 billion liquefied natural gas plant in B.C. as it steps up its campaign for tax incentives, according to a report. Andrew Bell has more,

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B.C.'s natural-gas development minister is downplaying reports that Malaysia's state-owned oil-and-gas giant is threatening to cancel a $10-billion (U.S) liquefied natural gas project in British Columbia.

Rich Coleman told reporters that talks are proceeding on the project despite a report in the Financial Times quoting the company's chief executive officer Shamsul Abbas that he is "ready to call off" the Pacific Northwest LNG project.

"I know what's going on at the table and I know there's good progress," Mr. Coleman said at the annual convention of the Union of B.C. Municipalities, in Whistler, B.C. He was taking a break from of the business of the UBCM to deal with the fallout from the report.

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Mr. Coleman said the Financial Times report prompted him to call Petronas today, and when he did he was told, "Our negotiations are going fine." He declined to say, exactly, to whom he spoke, citing the need to maintain the confidentiality of talks.

Asked if the comments could be a negotiating tactic, Mr. Coleman replied, "It could be. That could be fine. We're all big boys at the negotiating table."

The Financial Times report quoted Mr. Abbas as saying in an interview he is "ready to call off" the project amid a delayed regulatory approval process, plans by the B.C. government to impose an LNG tax and a "lack of appropriate incentives."

Mr. Coleman said the government continues to work on a tax regimes for the liquefied natural gas sector seen as a major economic prospect for the province, one that could create thousands of jobs and eliminate provincial debt. More than a dozen LNG ventures are envisaged for B.C.

The report comes as Canada's plans to become a major exporter of LNG – particularly to Asia – face intensifying global competition.

There are more than a dozen ventures envisaged for B.C., far too many given the rapid expansion of exports from the shale-gas rich United States, Australia, Qatar, Nigeria and elsewhere, experts say.

"The way things are developing the project remains uncertain and I doubt we will be able to make a positive [final investment decision] by year-end," Mr. Abbas is quoted in the FT article.

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"Rather than ensuring the development of the LNG industry through appropriate incentives and assurances of legal and fiscal stability, the Canadian landscape of LNG development is now one of uncertainty, delay and short vision," Mr. Abbas said.

He is expected to visit Canada Friday.

According to the Financial Times report, he said that the U.S. is now "leading Canada by a far stretch" in the LNG game. Canada is "already 40 years behind in the game," he said.

"Canada has to buck up real fast to be a credible global LNG player if it wants to be taken seriously by potential investors. Until investors cross the final investment line with an economically viable project, they remain just potential investors on paper," he said.

B.C. Premier Christy Clark is a keen promoter of the development of LNG export facilities in the province. The government is set to pitch the benefits of LNG development at local public meetings next month. It says the construction of five plants could create 58,700 direct and indirect construction jobs as well as 23,800 positions in LNG plant operations.

Provincial officials say they are confident progress is being made in clearing all the regulatory, environmental, fiscal and other hurdles to allow for work to get under way.

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Industry experts have also warned that many First Nations groups remain opposed.

The province is expected to unveil LNG tax rules next month, just as LNG promoters get closer to making final decisions on whether or not to greenlight the expensive, large-scale projects; facilities to be built include export terminals and pipelines.

The natural gas, in liquid form, would be shipped aboard tankers to energy-thirsty Asian markets.

Petronas is leading a partnership for construction of a natural gas liquefaction and export facility on Lelu Island in northwestern B.C.

It has a 62-per-cent stake, while Chinese energy giant Sinopec has a 15-per-cent interest, Japan Petroleum Exploration Co. Ltd. and Indian Oil Corp. are in for 10 per cent and PetroleumBrunei owns a 3-per-cent interest.

Other major proposals include one led by Shell Canada Energy.

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About the Authors
B.C. reporter

Ian Bailey is a Vancouver-based reporter for The Globe and Mail.  He covers politics and general news. Prior to arriving at The Globe and Mail, he reported from Toronto and St. John’s for The Canadian Press.  He has also covered British Columbia for CP, The National Post and The Province. More

Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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