Petronas cancels $11.4-billion LNG project near Prince Rupert

Malaysian state-controlled energy giant Petronas has pulled the plug on the proposed $11.4-billion Pacific NorthWest LNG project near Prince Rupert.

Petronas planned to build a LNG processing plant on Lelu Island that would have shipped 19 million tonnes a year of liquefied gas to markets in Asia, while pumping more than five million tonnes of carbon dioxide annually into the atmosphere. 

The project received federal government approval last September.

In a statement, Petronas said it cancelled the project “after a careful and total review of the project amid changes in market conditions.”

“We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision,” said Anuar Taib, Petronas executive vice-president and chief executive officer. 

“We, along with our North Montney Joint Venture partners, remain committed to developing our significant natural gas assets in Canada and will continue to explore all options as part of our long-term investment strategy moving forward.”

Taib said the formation of a new B.C. NDP government – which previously opposed building the plant on Lelu Island, located near a salmon run important to local First Nations – wasn’t a factor in the decision.

Michelle Mungall, B.C.’s minister of energy, mines and petroleum resources, said she would immediately begin work with people in the LNG sector to ensure them that the new B.C. NDP government has plans in place to see other projects come together.

“The company was very clear – this was a decision they are making because of the economic challenges in the global marketplace,” Mungall said.

“We respect the company’s decision and will now move on to support the prospects of British Columbia’s natural-gas sector to create good-paying jobs right here in British Columbia.”

Port Edward mayor Dave MacDonald said Tuesday he was very disappointed about the announcement, but added his community, the closest to the project, would position itself for other smaller development projects.

“The decision was well beyond our control. Port Edward did everything we could,” said MacDonald, whose council had supported the project.

“You hear it’s ‘never going to happen, it’s never going to happen.’ But we tried to remain optimistic,” he said, even as global natural gas prices fell.

The decision was well beyond our control. Port Edward did everything we could

The community of 600, adjacent to the larger community of Prince Rupert, is in sight of Lelu Island, where the LNG terminal was slated to be built.

The community stood to gain from taxes, improved infrastructure, jobs and a major camp that would house thousands of workers.

Pacific NorthWest LNG had received federal approval last September. It had been one of the leading LNG project proposals for several years.

The plant would have shipped 19 million tonnes a year of liquefied gas to markets in Asia, while pumping more than five million tonnes of carbon dioxide annually into the atmosphere.

The project’s approval represented one component of a complex and politically delicate balancing act by Trudeau, who won the hearts and minds of young Canadians — especially in B.C. — with his promise to show greater respect for the environment than his predecessor, Stephen Harper. But Trudeau also vowed to help Canada’s natural-resource industry to market in order to create more middle-class jobs.

The former Liberal government, led by Christy Clark, had promoted LNG as an economic boon to the province, but it failed to materialize under her watch.

Other jurisdictions, including the U.S., jumped in ahead of B.C. and then major energy companies dialed back spending when oil prices plummeted.

Even without Petronas, there are other leading LNG projects that that continue to say they remain interested in B.C.

LNG Canada, backed by a consortium led by Royal Dutch Shell plc, and Kitimat LNG, a joint venture between Chevron and Australian-based Woodside, are trying to position themselves to be ready to make a decision on building billions-of-dollars of mega-projects to coincide with increased demand they forecast could kick in by the middle of next decade.

LNG Canada is an up-to-$40-billion project and Kitimat LNG is pegged at $3.5 billion.

A much smaller project, at $1.6 billion, Woodfibre LNG, near Squamish, has already said it will go ahead. No construction date has been set.

The opposition Liberals were quick to point the finger at the new NDP government for the Petronas pullout, despite the fact the company itself was blaming market conditions.

“It’s time for John Horgan and the NDP to start paying attention to the rest of the province” said Ellis Ross, Liberal MLA for Skeena.”Responsible resource development is essential to maintaining B.C.’s thriving economy and supporting families.”

B.C.’s future does not lie in chasing yesterday’s fossil fuel economy

Meanwhile, Green Leader Andrew Weaver said the global marketplace does not support the LNG industry that the B.C. Liberals backed.

“B.C.’s future does not lie in chasing yesterday’s fossil fuel economy; it lies in taking advantage of opportunities in the emerging economy in order to create economic prosperity in B.C. These opportunities must be available to people in all regions of our province,” Weaver said.

The B.C. LNG Alliance, made up of companies with proposed projects in the province, issued a statement Tuesday noting that projects must be globally cost-competitive to move forward.

In the statement, Gillian Robinson, a spokeswoman for the advocacy group, said the alliance’s focus in the coming months is to work with the new B.C. government and federal government to ensure B.C. will see the benefits of an LNG export sector.

“We have a window of opportunity to develop B.C.’s LNG industry, but the next several years will be critical.  We risk losing thousands of jobs and billions of dollars in benefits if B.C. does not have diversified access to markets,” said Robinson.

The environmental group Wilderness Committee called the cancellation of the project a “massive win” for communities on the Skeena River and the global climate.

“We’re absolutely thrilled that the Malaysian backers of this liquefied natural gas terminal have backed down from their reckless plan to jeopardize BC’s second largest salmon run and blow our provincial climate targets,” said Peter McCartney, climate campaigner for the Wilderness Committee.

McCartney said the project would have produced 11 mega-tonnes of carbon a year, more than all the vehicles, buildings and landfills in Metro Vancouver produce.

Shannon McPhail, executive director of the Skeena Watershed Conservation Coalition, said they were celebrating that Petronas had left the Skeena River estuary and the possibility of permanent protection of the estuary.

“The value of this place has been recognized by First Nations, scientists and communities across Canada,” said McPhail. “This decision moves us one step closer to honouring the true value and importance of this place to our wild salmon economy, culture and identity in the northwest.”

The evaporation of an LNG project: A chronology of Pacific NorthWest LNG:

CANADIAN PRESS — Here is a look at how the Pacific NorthWest LNG project evolved over the last several years before the announcement of its demise Tuesday:

Feb. 19, 2013: Pacific NorthWest LNG submits its project description to the Canadian Environmental Assessment Agency.

April 29, 2013: Japan Petroleum Exploration Co. Ltd. buys a 10 per cent stake in Pacific NorthWest LNG and agrees to buy 10 per cent of the liquefied natural gas produced over at least 20 years, becoming the first secure buyer.

Dec. 16, 2013: The National Energy Board grants Pacific NorthWest LNG a licence to export up to 22.2 million tonnes of LNG annually for 25 years. It had applied in July for a licence to export up to 19.68 million tonnes, beginning in 2019.

Feb. 28, 2014: Pacific NorthWest LNG submits its environmental impact statement to the Canadian Environmental Assessment Agency.

March 26, 2014: The federal government approves Pacific NorthWest LNG’s export licence.

June 11, 2015: In what it calls its final investment decision, Pacific NorthWest LNG announces it will proceed with the project as long as it satisfies two conditions: approval of a project development agreement by the B.C. legislature and clearing the federal environmental assessment review process.

July 21, 2015: The B.C. government passes legislation to ratify a project development agreement with Pacific NorthWest LNG.

March 21, 2016: The federal government grants the Canadian Environmental Assessment Agency more time to review the project.

Sept, 27, 2016: The federal government approves the project with 190 conditions, including for the first time a maximum cap on greenhouse gas emissions.

Oct. 27, 2016: Two First Nations and an environmental group file separate applications for judicial review in Federal Court to quash approval of the project. A fourth challenge is launched in January 2017.

July 25, 2017: Pacific Northwest LNG says it will not proceed with the project, citing poor market conditions including a prolonged period of low LNG prices. 

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