KUALA LUMPUR, July 28 2017 : Petronas is not planning to abandon its interests in Canada despite the cancellation of the Pacific NorthWest LNG (PNWLNG) project.
In a statement to The Mole, the national petroleum company said it remains committed to Canada through its wholly-owned subsidiary, Progress Energy Canada Ltd, which is now finalising its new strategy in Canada and other parts of North America after the cancellation of the PNWLNG.
Progress Energy is currently focusing on the North Montney Joint Venture (NMJV) project in which it owns a 62 per cent equity interest. The remaining 38 per cent interest are owned by Japan Petroleum Export Corporation, IndianOil Corporation, Sinopec-China Huadian and PetroleumBRUNEI.
It has the same percentage of ownership with those partners in the cancelled PNWLNG project.
The NMJV area is approximately 800,000 acres of largely contiguous mineral rights in Canada, which is approximately 3,300 sq km and almost twice the size of Malacca.
Progress Energy is also currently operating the NOVA Gas Transmission Line (NGTL) which brings gas southward from the NMJV area to the main Canadian gas grid called AECO .
Petronas said significant investments have been made to prove up reserves and resources in the NMJV area since 2012 as gas production there for the local Canadian market increased from around 200 million standard cubic feet per day (mmscfd) that year to 540 mmscf/day this year.
It stated that for the first half of this year, the venture has generated a revenue of CAD261 million (RM861 million).
With a combined total of 22.3 trillion cubic feet (tcf) of proven resources (from 13.4 tcf previously), NMJV is currently Petronas’ second largest resource holding after Malaysia.
It was estimated that once production there reached the same level of that in Peninsular Malaysia, which is at two billion cubic feet/day, the resource could accord Petronas a continuous business presence in Canada for almost 20 years.
Addressing issues surrounding the cancellation of PNWLNG, Petronas explained that the project was first conceived in 2012 as another option to accelerate the monetisation of the gas resources from the North Montney area by producing LNG for the export markets.
The next year, TransCanada was appointed by Progress Energy to design, build, own and operate the 900-km Prince Rupert Gas Transmission (PRGT) pipeline which was supposed to bring gas westward to the PNWLNG project site from the NGTL connection to the AECO grid. It would have also included the construction and operation of three compressor stations and a metering station, with an initial capacity of 2.0 billion cubic feet per day.
The PNWLNG project was then sanctioned by all its shareholders in June 2015, pending approval of the Canadian Environmental Assessment Agency (CEAA) and firming up additional project scope and costs.
The CEAA approval was received in September 2016 with 190 conditions. The conditions and further firming up of project scope and costs, resulted in a significant cost increase of the project.
Meanwhile, world oil prices had started its unprecedentedly prolonged drop in June 2014 and it lasts until now and likely into the foreseeable future. This has resulted in drastic structural shifts in the industry and changed market landscape and conditions.
Petronas said the shareholders of PNWLNG, after a thorough and lengthy review of the project from all aspects, found that it did not meet its economic threshold and therefore decided not to proceed with the project.
Concurrently, the contract for the design and construction of the PRGT pipeline with TransCanada was terminated.
Despite the PNWLNG setback, Petronas said it is still positioning Progress Energy to be one of the top natural gas exporters in North America and looking at various options to monetise its resources.
Petronas also stated that it believes that the LNG industry could thrive in British Columbia with the right project at the right time and that the development of such business requires a long term view of the market, world-class natural gas resources, competitive project cost and supportive market conditions.