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Petronas buys 25 pct of LNG Canada export project

May 31, 2018
3 min read
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Malaysia’s oil and gas company Petroliam Nasional Bhd (Petronas) is buying a 25 percent stake in a Canadian liquefied natural gas (LNG) export project, project operator Shell said on Thursday.

Petronas will take an equity stake in LNG Canada, located in Kitimat, British Columbia on the west coast of Canada through its wholly owned entity the North Montney LNG Limited Partnership, having scrapped plans almost a year ago to build its own LNG terminal.

The LNG export facility that would initially consist of two world-scale LNG processing units or trains. The project would include an option to expand to four trains in the future.

The final investment decision remains pending, Shell said in a statement of behalf of partners Shell Canada Energy, PetroChina Kitimat LNG Partnership, Diamond LNG Canada Ltd. and Kogas Canada LNG Ltd.

After approval and closing of the stake purchase, the value of which was not disclosed, will result in Shell Canada Energy, a Shell subsidiary holding a 40 per cent ownership interest in LNG; Petronas holding 25 per cent, PetroChina Kitimat LNG Partnership, a subsidiary of PetroChina Canada holding 15 per cent; Diamond LNG Canada Ltd., a subsidiary of Mitsubishi Corporation holding 15 per cent and Kogas Canada LNG also holding 15 per cent.

Prasanth Kakaraparthi, senior analyst, Wood Mackenzie said the deal marks an interesting turn of events after PETRONAS cancelled its CA$36 billion Pacific North West project in July 2017.

“With nearly 52 Tcf of reserves and contingent resources – Canada is the second largest resource holder in PETRONAS’ portfolio after Malaysia. Consequently, monetisation through LNG is inevitable given the weak outlook for domestic prices.”

He said that cost will be a major concern for the project. “Shell has announced its intent to make a decision by end of this year. But before LNG Canada can take FID, it will need to lower costs and take advantage of the latest tax breaks announced by the BC government.”

LNG Canada could add up to 7MT of equity LNG into PETRONAS portfolio – nearly 20 per cent of its 2023 supply, which would be a positive development for PETRONAS, he added.

British Columbia (B.C.) is home to one of the largest and most accessible sources of natural gas in the world. If constructed, LNG Canada participants will ship natural gas, including from B.C.’s vast reserves, to various countries where the imported gas could displace more carbon intensive energy sources, helping to reduce greenhouse gas emissions.

LNG Canada recently selected the joint venture of JGC Corporation and Fluor Corporation as the Engineering, Procurement and Construction (EPC) contractor for the project and is currently finalising materials in preparation for a final investment decision (FID) by joint venture participants.

Shell said the transaction announced today does not amount to an FID which remains pending. The timing and outcome of an FID will be decided by joint venture participants based on global energy markets, and the overall competitiveness and affordability of the project.

 

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