Thursday, September 25, 2014

Christy Clark not concerned about Petronas threat to pull out of $10-billion LNG project-Silly Girl

Christy Clark not concerned about Petronas threat to pull out of $10-billion LNG project

 
 
 

Premier Christy Clark announces a new LNG export facility to be built near Prince Rupert on Nov. 12, 2013, with Nexen CEO Kevin Reinhart, middle, and Rich Coleman. Clark says she’s not concerned Malaysian state-owned energy company Petronas is threatening to pull out of a liquefied natural gas project on the north coast of British Columbia, saying it’s all part of negotiations.

Photograph by: Ward Perrin, 


VANCOUVER - B.C. Premier Christy Clark says she’s not concerned Malaysian state-owned energy company Petronas is threatening to pull out of a liquefied natural gas project on the north coast of British Columbia, saying it’s all part of negotiations.
The Financial Times on Thursday reported that Petronas chief executive Shamsul Abbas was ready to call off the $10-billion project amid a delayed regulatory approval process, plans by the provincial government to impose an LNG tax and a “lack of appropriate incentives.”
“Rather than ensuring the development of the LNG industry through appropriate incentives and assurance of legal and fiscal stability, the Canadian landscape of LNG development is now one of uncertainty, delay and short vision,” Abbas told the Financial Times.
Petronas is considered to be the closest to a decision on building an LNG export facility in B.C. If it does decide to withdraw, it could be a serious blow to Clark’s plans for LNG to be B.C.’s major economic driver in the coming decades.
Despite the threat, Clark said she’s confident Petronas won’t pull out, and that the company was simply bargaining in public.
“We’re negotiating and this is part of negotiations,” said Clark, at a meeting with Chinese delegates from Guangdong province in Vancouver on Thursday. “What Petronas is doing is standing up and trying to get the absolute best deal they can get for their shareholders ... and we’re trying to get the best deal for British Columbians. That’s the process.”
Abbas is expected to visit Canada later this week.
If the energy company did call it off, Clark said there are still 15 companies on the hunt for LNG resources in Canada, including Shell, Chevron and Exxon, among others.
“I am very hopeful the Petronas deal is going to go ahead, ultimately the decision is in their hands,” she said.
While it’s not unusual to have a major company fire a warning shot over multi-billion dollar projects, it should serve as a sign that the government needs to have a financial structure in place as soon as possible so B.C. doesn’t lose this potential investment, according to an economic analyst with HSBC.
David Watt, HSBC’s chief economist and expert on Canada-Asia trade issues, said while other countries like the U.S. and Australia are moving forward with LNG projects, B.C. is in a period of stasis.
“We need to get the environment for LNG investment settled in Canada quickly or we will begin to fall behind and potentially miss the boat,” said Watt. “I think Petronas has already fired off several warning shots, and this is renewing the idea that there is an urgency to get this final investment decision done.”
The B.C. government proposed earlier this year a two-tier LNG tax on income from liquefaction of natural gas at facilities in B.C. Premier Christy Clark promised to have finalized all government-imposed LNG costs by Nov. 30, including taxes, as well as costs related to meeting environmental standards and First Nations compensation. Petronas and Pacific Northwest LNG had warned the government tax burden was very large, and it needed clarity to make its final investment decisions.
Petronas is leading the Pacific Northwest LNG project near Prince Rupert. The company holds a 62 per cent stake in the project.
Its partners include China’s Sinopec with a 15 per cent stake, Japex Montney with 10 per cent, Indian Oil Corp. Ltd. with 10 per cent and PetroleumBrunei with three per cent.
Pacific Northwest LNG is one of several projects that various companies have been considering as a way to export natural gas by tanker from the West coast.
Watt said while B.C. is waiting for the province, the U.S. is redeveloping its LNG import facilities to export facilities, giving them an infrastructure advantage.
“For companies that want to start exporting LNG from B.C. they are going to have large capital needs over the next few years and so they will want to start as soon as possible,” he said.
“The critical part is that we can’t delay any further the decision on this. This could send a signal to other potential energy projects about the (economic) environment for investing in LNG in B.C. And that could be crucial because we have many other projects heading toward investment decisions."
Petronas bought Progress Energy Corp. in 2012 in a deal that was closely scrutinized by Ottawa.
NDP MLA John Horgan, speaking Thursday at the UBCM meeting in Whistler, said he has met with Petronas officials in Vancouver and he was not surprised that they are concerned and anxious, adding that it sounds like they are negotiating in public.
“If that means that Mr. Coleman has got his eraser out and is scratching something down on an envelope, that speaks to a government not prepared for the opportunity of a lifeline,” he said
Rich Coleman, B.C.’s minister of natural gas development, told a group of municipal politicians at the Union of B.C. Municipalities convention this week that they need to make sure they don’t raise industrial tax rates so high they scare off potential projects.
Minister Mary Polak deferred to Coleman on taxation issues, but said the Petronas project is on track with their timeline.
“There is nothing unusual about it and nothing delaying. It appears to be going along exactly with the timelines they have asked us for,” she said,
Pressed further on why Petronas’ chief is now saying something different, Polak suggested he’s not getting complete information from his own staff on the ground.
If Petronas leaves, it won’t be the first energy company to depart B.C. in recent months. On July 31, Apache said it would exit the Chevron-led Kitimat LNG project, the first to have received a permit to export the fuel from federal regulators in 2011. Chevron said Aug. 1 that it will seek a new partner.
The B.C. government’s proposed LNG tax regime, which was unveiled in the February provincial budget, includes seven per cent on income from LNG facilities after capital costs are recovered.
The Clark government promised an LNG windfall for the province in last May’s provincial election, saying it could reap billions in revenue that would help pay for government services and erase the province’s debt.

No comments:

Post a Comment

Comments always welcome!