Petronas threatens to walk away from Canada LNG project: report

MALAYSIA'S national oil company Petronas has threatened to walk away from its proposed C$36 billion (S$37.43 billion) Pacific NorthWest LNG (liquefied natural gas) project if it does not get Canadian federal government's approval by March 31, 2016, the Financial Post reported on Tuesday.

The Canadian paper, citing an unnamed source, said Petronas is frustrated by the fresh uncertainty cast over the project as the government of Prime Minister Justin Trudeau looks set to toughen up environmental reviews of major energy projects.

His government said in January new energy projects would be subject to additional assessment on "direct and upstream greenhouse gas emissions".

The Post report said Petronas, having spent C$12 billion to advance the project to a conditional final investment decision (FID), would not accept additional hurdles from the federal Cabinet.

"They have given Trudeau to Mar 31 to either approve it as it stands now or they are going to leave," the report cited an unnamed source as saying.

Petronas had reiterated its commitment to the project at its full-year results briefing despite announcing a plan to cut RM15 billion (S$5.05 billion) to RM20 billion in capital and operational expenditure this year, The Business Times reported on Feb 29.

Backed by project partners with clout in LNG-importing countries in Asia including the likes of China Petroleum & Chemical Corporation, Japan Petroleum Exploration Co and India Oil Corporation, Pacific NorthWest LNG is widely considered as the most promising mega LNG project in Canada to progress to a full FID.

The economic feasibility of the project - as with other mega LNG developments - has, however, been challenged amid an unfavourable oil-linked LNG price environment.

The spot price for LNG cargoes to North-east Asia has tumbled to its lowest since 2010, according to New York-based Energy Intelligence Group, and analysts have flagged continued price pressures possibly continuing into 2017 and beyond on a developing LNG supply glut.