‘Market Awash in LNG’ Spells End of $36-Billion Petronas Project in B.C.
Malaysian state oil company Petronas ended months of speculation yesterday with the announcement that it is stepping away from its intensely controversial, C$36-billion Pacific NorthWest liquefied natural gas (LNG) project in British Columbia.
“The decision to cancel the development boiled down to simple economics—a world market awash in liquefied natural gas, which has driven down prices, making Pacific NorthWest LNG no longer financially viable,” Canadian Press reports, citing Anuar Taib, CEO of Petronas’s oil and gas production division.
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“Unfortunately for us, we don’t believe we have that mix of where the sweet spot can be hit,” he said.
“Today is a very difficult day for Pacific NorthWest LNG and Petronas,” Taib added. “We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry has led to this decision.”
The Financial Post reports that Petronas had already spent C$400 million on the project.
The federal and provincial governments were both quick to emphasize that the decision was based on market factors.
“The company was very clear: this was a decision they are making because of the economic challenges in the global energy marketplace,” said B.C. Energy Minister Michelle Mungall. “The Pacific NorthWest LNG project as proposed in its current state was uneconomical to move forward.”
Natural Resources Canada spokesperson Alexandre Deslongchamps told CBC Pacific NorthWest was approved under the federal review process for major projects. “Once a project is approved, it is then up to the proponent to decide how to proceed. Today’s announcement concerning the Pacific NorthWest LNG project was a business decision made by the proponent.”
While the newly-minted Liberal opposition in Victoria was quick to blame a “closed for business” agenda on the part of the B.C. NDP, Taib said the change in government had no bearing on the decision. “We actually look forward to working with John Horgan and his government as we develop our vast assets in the Montney joint venture area,” he said.
In fact, Petronas first announced it would “revisit” the project last August, after its quarterly profits plunged 96% in the second quarter of 2016.
In response to the B.C. Liberal claims, Green Party Leader Andrew Weaver said the previous government’s “singular pursuit of the LNG industry” was a mistake, CP writes.
“B.C.’s future does not lie in chasing yesterday’s fossil fuel economy,” Weaver said. “It lies in taking advantage of opportunities in the emerging economy in order to create economic prosperity in B.C.”
“I’ve been expecting this for quite some time. I was on record saying LNG in British Columbia was not going to happen anytime soon because of global markets,” he told CBC. “It was unrealistic, it was misleading to the general public, and here we have the evidence.”
Greenpeace Canada climate and energy campaign head Keith Stewart called the Petronas decision “good news all around, because this project would have lost money while fuelling dangerous levels of climate change.” He added that “the sooner we move on from fossil fuel megaprojects to building the renewable energy economy, the better positioned we’ll be to thrive in the emerging low-carbon world.”
“We’re absolutely thrilled that the Malaysian backers of this liquefied natural gas terminal have backed down from their reckless plan to jeopardize B.C.’s second-largest salmon run and blow our provincial climate targets,” added Wilderness Society climate campaigner Peter McCartney.
“I’m having a great morning,” said Lax Kwa’laams hereditary chief Donald Wesley, whose community had staunchly opposed the project. “Everyone is happy.”
But while CBC said many earlier LNG proponents in the area had given up on the promise of megaproject-driven jobs, Fort Nelson, B.C. Mayor Bill Streeper was worried about the community that showed the second-fastest population decline in Canada in 2016, according to Statistics Canada.
“Fort Nelson right now is just about a solid ghost town,” he said. “We have no industry whatsoever.”
Port Edward Mayor Dave MacDonald said even the promise of an LNG boom had brought benefits to his town, but now he sees the future in smaller economic developments. “We’re just moving forward,” he told CBC.
With Petronas attributing its decision to declining world markets for natural gas, Pembina Institute Acting B.C. Director Karen Tam Wu noted that “LNG demand and prices have fallen as the world transitions to renewable sources of energy. We now have an important opportunity to ensure B.C. is not left behind as the global economy shifts and the costs of a changing climate begin to mount.”
She added that “across B.C., communities have stood up and said LNG development doesn’t fit with their vision for a prosperous economy. The cancellation of this project highlights the need for B.C.’s new government to act quickly to stand up for healthy and safe communities, grow sustainable resource sector jobs, build a strong clean tech sector, position B.C. to be competitive in the changing global economy, and make clean choices more affordable.”
On National Observer, commentator and Acting Business Director Chris Hatch said the cancellation points to the need for a just transition off fossil fuels.
“Zooming out to the big picture, it is increasingly clear that what’s needed is not just the ‘transition’ to a sustainable economy, mooted by the federal Liberals, but a national effort towards a just transition for fossil fuel workers,” he wrote. “Workers in the fossil fuel sectors—and Canada’s economy as a whole—need industries that are there for the future, not ones that are willing to risk fraud charges to eke out some more years in business.”