Act now on LNG, or Petronas could delay investment by up to 15 years, threatens CEO

Petronas president CEO Shamzul Azhar Abbas has warned that an unfavourable tax scheme with regard to the company’s Pacific NorthWest LNG project could delay a final investment decision by ...


Petronas president and CEO Shamsul Azhar Abbas  

Petronas president CEO Shamzul Azhar Abbas has warned that an unfavourable tax scheme with regard to the company’s Pacific NorthWest LNG project could delay a final investment decision by several years, despite saying he is “encouraged” by recent discussions with the provincial government.

A high LNG tax and other costs could make the project economically unviable, he said.

A clear action plan is needed by the end of October, he said. If this is not achieved, the project will be delayed by 10-15 years, which he believes will be the next “LNG marketing window.”

“…the reality of the global LNG market is that we are facing potential overhang and decreasing demand that creates downward pressure on LNG prices. In this market environment, the ability to secure market and customers is paramount,” Abbas said in a release October 6

“Coupled with softening crude prices, there is a need for international energy companies such as PETRONAS to seriously prioritize and reassess our investments. The proposed fiscal package and regulatory pace in Canada threatens the global competitiveness of the PNW LNG project. This is further exacerbated by preliminary project costs, which indicates cost of local contractors to be higher and not benchmarked to global contractor's cost.”

If the action plan is not complete by the end of the month, a final investment decision is unlikely by December 31. In September, Abbas told Britain’s Financial Times that he is doubtful the company will make a final decision by the end of the year.

Prior to that, he had already warned the province against “unrealistic expectations” regarding the future of LNG.

ecrawford@biv.com

@EmmaHampelBIV