Petronas’ CEO has a warning for B.C.: don’t fumble LNG like Australia did

If there was any doubt before, the Pacific Northwest LNG project led by Petronas is now the front-runner in the race to build a liquefied natural gas export industry off Canada’s West Coast. This much was clear as Tan Sri Dato’ Shamsul Azhar Abbas, Petronas’ president and CEO, gave a keynote speech to open the second annual LNG in BC conference in Vancouver on May 21.

“Petronas and its offtake partners plan to come to a final investment decision before the end of this year,” he affirmed, adding that he hoped to return in a year’s time to report on the progress of construction of the $36-billion project. The two hurdles remaining are firming up subsidiary Progress Energy’s natural gas reserves through a drilling program this summer—it’s so far proven half the resource base to supply its proposed export capacity and is currently the most active driller in Canada, with between 25 and 30 rigs in the field—and to await the B.C. government’s final tax and royalty formula.

Petronas has one big advantage over its rival LNG proponents: the Malaysian state energy company essentially has its purchase agreements in place with customers it already supplies from Malaysia and, in the near future, Australia. Rival LNG developers, notably the multinational oil giants Chevron and Shell, have yet to reach commercial agreements. The suppliers want to maintain a pricing regime linked to oil; Asian customers are pressing for a price linked to cheaper North American gas, which is already being offered by some American exporters.

Tan Sri Dato’ applauded the “commitment and dedication” of B.C. Premier Christy Clark and her government for travelling to Malaysia to see Petronas’ LNG facilities in person. But he wasn’t above negotiating in public, warning against “unrealistic expectations” for government revenue. Despite the more than US$100 billion already invested in Australia’s notoriously overbudget LNG projects, the LNG and coalbed methane boom there has “fizzled before it took off,” he insisted.

He also made a veiled appeal to what would be the host communities of its operations in B.C., Prince Rupert and Fort St. John, noting how, in addition to an attractive investment climate and market connectivity, Petronas seeks to invest in welcoming communities. He noted how what was once the “relatively obscure fishing village” of Bintulu, Sarawak, is now a globally significant LNG supply hub as a result of Petronas’ largesse.

“LNG doesn’t come at all costs,” he said. “Let’s not slaughter the goose before it has the chance to hatch the golden egg.”