Huge Petronas Canada LNG project runs into further delays

Huge Petronas Canada LNG project runs into further delays

A major liquefied natural gas export project in Canada ran into another delay on Saturday when the

federal environmental assessment agency was granted an extra three months to finish an impact study.

Ottawa did though commit to announcing a final decision on the project this year, which would end a

long-running saga for Malaysia’s state-owned oil giant Petronas.

The firm and its partners have been waiting nearly three years for a permit to build the Pacific

NorthWest LNG facility in northern British Columbia, on the Pacific coast.

News of the latest delay broke on Saturday, when federal Environment Minister Catherine McKenna

agreed to the Canadian Environmental Assessment Agency’s request (CEAA) for the extra three months.

The CEAA – which had been due to deliver its report to McKenna by March 22 – said it needed more

data from the project’s backers after they handed over a series of documents and observations on

March 4.

A spokeswoman for McKenna said the federal cabinet would announce a decision three months after

the backers had handed over the requested additional information.

The ambitious plan to build Canada’s first LNG export terminal faced challenges from the start, including

controversy over its chosen site, which local aboriginal and environment groups said would destroy a

critical salmon habitat.

It is also the first major project to have an environmental assessment completed under new rules that

include the impact of upstream production on project emissions.

A spokesman for Pacific NorthWest did not immediately respond to a request for comment.

Petronas, battling a profit-sapping slump in prices that could produce heavy losses, can ill afford to

splurge on future supply.

But neither can it afford a lengthy and inconclusive process with authorities in Canada, where the

project is seen as a test of Prime Minister Justin Trudeau’s green credentials.

Trudeau’s Liberals came to power last November promising to do a much better job of protecting the

environment than the previous Conservative government.

But the Liberals, who say Canada must cut emissions of greenhouse gases, are also under pressure to

push through approvals of projects in the energy sector, which is losing jobs due to the slump in oil and

gas prices.

“The agency has requested additional information from the proponent in order to determine whether

the project is likely to cause significant adverse environmental effects,” it said in the statement.

The request for more time to complete the impact study raises the prospect of more conditions on

construction. This could simply make the project economically enviable, analysts say, leaving Petronas to

write off billions already invested.

For Petronas, and Malaysia, the conditions have changed dramatically since it launched the project, long

considered a front-runner among dozens proposed for British Columbia.

Gas prices are currently a quarter of 2014’s peak. Last month, Petronas cut jobs and announced some

$12 billion in spending cuts over the next four years – the same sum analysts estimate it has sunk into

the Canadian project.

And Malaysia’s economy too is cooling, dampened by China and a domestic financial scandal. Petronas

is one of the country’s biggest employers and accounts for nearly a third of the government’s oil and

gas-related revenue.

The stakes are also high for Canada, which is seeking to kick start the local LNG industry, said Wood

Mackenzie analyst Chong Zhi Xin, speaking before Saturday’s announcement.

But those ambitions come as Trudeau promises to transform Canada’s environmental image. If built,

environmental campaigners say the Petronas project would tarnish that.

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