One day after the B.C. government announced long-term royalty and development agreements with Pacific NorthWest LNG, the project’s owner, Petronas, confirmed it would make a conditional final investment decision on the multi-billion dollar project in the coming weeks, according to Reuters.
At a first quarter earnings press conference May 22, the Malaysian energy giant’s new president, Wan Zulkiflee Wan Ariffin, confirmed that his company will make the final investment decision on $11 billion Pacific NorthWest LNG plant and associated $5 billion pipeline in the coming weeks.
That’s despite slumping revenues from lower prices and objections by a key First Nations player to the site the company has chosen in Prince Rupert.
Reuters and the Malaysian Insider quoted Ariffin, who referenced the deal announced a day earlier with the B.C. government on a commitment on tax rates and royalties:
"With this recent development, we are looking to achieve a conditional final investment decision in the coming weeks. We will continue to have constructive engagements with the First Nation, and keep all avenues open as we move forward with our project."
He referred to the Lax Kw’alaams, which last week rejected a $1.1 billion benefits agreement offered by Petronas in exchange for their support.
Lax kw’alaams leaders made it clear that the Lax Kw’alaams are not opposed to the LNG industry, just the site that Pacific NorthWest LNG has chosen. The site is problematic because of concerns about its impact on Flora Bank – an important salmon-rearing habitat at the mouth of the Skeena River.
In its first quarter earnings, Petronas reported a 21 per cent drop in revenue, due largely to low oil prices. It also reported capital investments of $4 billion for the first quarter in exploration, development and production in Malaysia and Canada.
Should Petronas green light its final investment decision on the Pacific NorthWest LNG project, the total capital expenditure in Canada is estimated at $36 billion, some of which would include its upstream natural gas assets, which it acquired when it bought Progress Energy Canada.
On May 21, the B.C. government announced a development agreement that provides guarantees on various tax rates – a move aimed at giving the company some long-term assurance that future governments will not increase carbon and LNG taxes. If it does, the development agreement requires the company to be compensated.
The government also agreed to a long-term structure on natural gas royalties that address natural gas price and production fluctuations.
Another major milestone still needs to be cleared before the Pacific NorthWest LNG project can go forward: A green light from the Canadian Environmental Assessment Agency.