Petronas warns of 15-year delay to Canada LNG project if no tax deal

Oct. 8, 2014

Petronas, Malaysia’s state-owned energy company, has warned that a planned $11 billion liquefied natural gas (LNG) plant in Canada could be delayed by up to 15 years unless a favorable tax deal is secured by the end of the month.

Petronas, Malaysia's state-owned energy company, has warned that a planned $11 billion liquefied natural gas (LNG) plant in Canada could be delayed by up to 15 years unless a favorable tax deal is secured by the end of the month.

The company said on Tuesday that the economics of the plant are marginal in the current high-cost environment and without "material cost reduction efforts" the project could be shelved for at least a decade.

Urging government officials and regulators to act now, Petronas said that it needs to secure consensus on key principles vital to the success of the project by October 31.

"Missing this date will have the impact of having to defer its investments until the next LNG marketing window, anticipated in 10-15 years," the company claimed.

The Pacific NorthWest LNG joint venture, which is led by Petronas, plans to build a natural gas liquefaction and export facility on Lelu Island, near Prince Rupert in northwestern British Columbia. The facility would liquefy natural gas produced by Progress Energy Canada Ltd. in northeastern British Columbia, and export it to Asian buyers.

According to the Globe and Mail, last month the president and CEO of Petronas threatened to cancel the project unless regulators cut red tape and the British Columbia government came forward with a competitive tax regime.

Yet industry observers have highlighted the fact that Petronas has already spent billions of dollars on natural gas drilling projects in British Columbia, the newspaper said.

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