Malaysia’s Petronas threatening to abandon LNG project over new climate change rules
Malaysia’s Petronas is frustrated that Prime Minister Justin Trudeau’s climate-change priorities are introducing new uncertainty for its proposed $36 billion Pacific NorthWest LNG project in northern British Columbia and has threatened to walk away if it doesn’t get federal approval by March 31, according to a source close to the project.
The project, to be located on federal lands on Lelu Island near Prince Rupert, received a largely favourable assessment from the Canadian Environmental Assessment Agency (CEAA) last month, was greenlighted by the British Columbia government in November, 2014, and received conditional corporate support — or a final investment decision — from Malaysia’s state-owned company and its partners in June of last year.
But the new federal Liberal government is toughening up environmental reviews of major energy projects to regain “public trust” and as it strives to meet international commitments to reduce greenhouse gas emissions.
It said in January they would be subject to additional assessment on “direct and upstream greenhouse gas emissions.” A spokeswoman for CEAA said she would look into how the new requirements will impact Pacific NorthWest LNG.
After spending an estimated $12 billion to get the project to this stage, and having suffered multiple delays and setbacks, including aboriginal and environmental movement opposition, Petronas has conveyed to federal cabinet ministers it won’t accept additional hurdles.
“They have given Trudeau to March 31 to either approve it as it stands now or they are going to leave,” the source told the Financial Post. “They started off with the Conservatives, and the (environmental) standards are very high. They said OK we will meet those standards and they did in all the engineering and design of the project. This last greenhouse gas thing that Trudeau came up with really threw them for a loop.”
The big worry is that the cabinet, which has final say, will keep stalling instead of handing down a decision while the project continues to burn cash, the source said.
Meanwhile, market conditions for LNG are deteriorating, proponents want to cut their losses and are looking at other opportunities, the source said.
Petronas and its partners (China’s Sinopec, Japan Petroleum Exploration Co., India Oil Corp. and Petroleum Brunei) were widely seen as the most likely to move forward with LNG exports from Canada’s West Coast because they have customers and don’t have the same profit expectations as shareholder-owned companies.
Not one of the two-dozen groups that proposed LNG export projects has gone ahead due to regulatory delays, rising competition from United States LNG exporters, plummeting prices, and aboriginal and environmental group opposition.
The AltaGas-led group proposing the Douglas Channel LNG project stopped development last month and Royal Dutch Shell has delayed its final investment decision on its proposed terminal near Kitimat until the end of this year.
Michael Culbert, president of Pacific NorthWest LNG, said in an emailed statement Monday that he was in Kuala Lumpur, where Petronas is headquartered, and unable to provide comment.
A spokesman for the company said it was business as usual and highlighted remarks made on Feb. 29 by Petronas president and group CEO Datuk Wan Zulkiflee Wan Ariffin: “As far as the Pacific Northwest LNG project in Canada is concerned, we continue to work towards achieving full FID,” he said. “We are reviewing the draft report (of the CEAA) including the conditions.”
In its draft report on the Pacific NorthWest project, the CEAA concluded it would likely cause significant adverse effects on “harbor porpoise and as a result of greenhouse gas emissions” but “with respect to all other valued components, the agency concludes that the project is not likely to cause significant adverse environmental effects taking into account the implementation of key mitigation measures.”
The CEAA is now conducting consultations and will make a recommendation to federal environment and climate change minister Catherine McKenna.
The consultation process has turned into yet another platform for organized opposition to push for the project’s defeat, the source said.
The LNG project is conducting its own campaign. In an emailed statement obtained by the Financial Post, Culbert urges supporters to get family and friends to send letters to the CEAA by March 11, when the public comment period ends.
“Now is the time to voice your support,” Culbert writes. “Our opponents have been sending their thoughts to CEAA. Have you told Ottawa why you support the LNG business in Canada?”