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Petronas mulls exit of Pacific NorthWest LNG: Reuters

Local LNG supporters to celebrate federal approval tonight at Lakepoint
petronas
A logo of a Petronas fuel station is seen against a darkening sky in Kuala Lumpur, Malaysia February 10, 2016. REUTERS/Olivia Harris Photo

Petronas is said to be weighing its options for the Pacific NorthWest LNG project, including the possible sale of its stake in the $36-billion project.

The project received environmental approval from Ottawa this week, nearly two years after the B.C. government stamped its approval on the project in 2014.

However, three sources with knowledge of the project told Reuters that the Malaysian state-owned firm has been considering selling its majority stake in the project for months. Crude oil prices have dropped more than 50 per cent since 2014, which has cut the company's profits and forced it to drastically scale back its capital spending plans.

Project executives still have to evaluate the 190 conditions imposed on the project before making a final investment decision, which some believe won't come until after the May 2017 provincial election in B.C.

“They are going to be looking at gas prices, costs and returns before they make the final decision,” a source told Reuters. “It is a very tough call.”

According to the Canadian Press, Petronas has a 62 per cent stake in both the LNG processing facility on Lelu Island and the natural gas reserves in Northeast B.C. that would feed into it. 

Other partners include Sinopec with a 15 per cent stake, JAPEX and the Indian Oil Corp. with 10 per cent each, and PetroleumBRUNEI with three per cent. 

The entire cost of the project includes an $11 billion export terminal, $6.5 billion in pipelines, and the $5.5 billion Petronas spent to buy Progress Energy. The project consortium would spend roughly $2 billion a year to drill and produce gas for the project, according to the Canadian Press.

In June 2015, Petronas and its partners sanctioned the project on two conditions: approval from British Columbia's legislature and the granting of an environmental assessment from the federal government.

Read the full Reuters report by clicking here.

Local LNG supporters to celebrate tonight

Meanwhile, local LNG supporters plan to celebrate Ottawa's approval of the project tonight in Charlie Lake.

Fort St. John for LNG Founder Alan Yu says his group will celebrate the approval at the Lakepoint Golf and Country Club at 6:30 p.m.

"I have told my close friends that I never doubt that the feds would approve the (project)," Yu said earlier this week.

"Canada's economic needs require that we bring our natural resources to market. At this point in Canada's economic history, to deny economic gain from natural resources would mean a reversal in economic prosperity that Canadians are used to."

On Thursday, Yu said he had heard rumours of potential sale by Petronas, but said he believed there was still "light at the end of the tunnel."

"OPEC has agreed to limit its production and this will lead ultimately to higher oil prices," he said.

"Japan consumes 30 per cent of the world's LNG production and sets the LNG price at Japan's landed oil price. This means that LNG price will also follow. Major oil producers are hurting at these bottom prices and it is inevitable that they will find a way to increase their prices from the supply side."

--with files from the Canadian Press