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The $36 billion question: Will he or won't he?

Now in his first week on the job, Petronas CEO holds fate of Pacific NorthWest LNG in his hands

While British Columbia awaits a final investment decision on one of the proposed liquefied natural gas (LNG) export projects, presumed frontrunner Petronas has a new leader at the helm. And it won’t be long before he’ll be involved in making one of the biggest decisions of his career.

April 1 marked Wan Zulkiflee Wan Ariffin’s first day as president and chief executive officer of Petronas, which is owner of Progress Energy Canada Ltd. and Pacific NorthWest LNG. He took over from Shamsul Azhar Abbas, moving up from the position of chief operating officer.

Ariffin will ultimately decide if the long-anticipated NorthWest LNG will move forward or not. A final investment decision was expected to be announced by the end of 2014, but in December the company delayed it to June.

The stakes are massive, for both Petronas and B.C. The energy giant has about $36 billion on the table in British Columbia’s fledgling natural gas industry — the largest direct foreign investment in Canada. 

But it isn’t a done deal.

The Globe and Mail reported in February that the incoming CEO was planning to meet with Premier Christy Clark and Deputy Premier Rich Coleman in March, by the ministry could not confirm that the meeting had happened. Pacific Northwest LNG didn't return calls for comment.

The project is still waiting on the federal environmental regulator to release its findings, also scheduled for late June. After announcing the LNG tax regime late last year, and clearing the project through the B.C. Environmental Assessment Office, there’s little else the province can do to influence the decision.

Meanwhile, further upstream, drilling in Western Canada hasn’t been as robust as it has been in previous winters.

February and March are the busiest and most consistent times for drilling for both oil and gas, but the early months of 2015 saw active rigs plunge from over 400 in January to about 100 in April, according to Rig Locator. That’s largely due to oil prices halving in the past 10 month.

Rig Locator defines an active rig as one that is drilling, rigging up or moving.

Looking at just British Columbia. Last month, 51 per cent of rigs in the province were active, down from 82 per cent last March. At the start of the year, there were just over 60 wells being drilled in the province. That now sits at just under 40.

One producer that didn’t slow as much was Progress Energy, owned by Malaysian’s state-run Petronas, which has holdings in the North Montney and Deep Basin.

Progress, still the overall top drilling rig operator, had 11 active rigs as of April 6. Last month, Progress was moving at an even higher rate, with twice that number of rigs. From January to March they had 18 to 22 active rigs, slowing only in the past few weeks.

As far as other LNG projects go, the $1.7 billion Woodfibre LNG appears to be the farthest along, with Coleman announcing at an LNG event in Squamish this past January that he expected the decision to come down this year. That project’s public comment period for its provincial environmental assessment was extended by 15 days, due to the “high level of public interest” read the B.C. EAO decision. That project is one of the smaller proposals, applying to the National Energy Board (NEB) to export up to 2.1 million tonnes of LNG per year, contrasted with Pacific NorthWest’s 22.2 million.

Smaller projects like Woodfibre and AltaGas’s Douglas Channel LNG are the two that are leading the pack with Pacific NorthWest, the province said last month. Shell Canada has said that they expect to make a FID on their $40 billion LNG Canada Gas project by 2016.

So far 10 projects in B.C. and the Pacific Northwest United States have been approved by the NEB to export LNG out of the country, while another 10 have yet to apply or are waiting for approval.

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