Petronas and Progress announce go-ahead for $9-billion LNG plant at Prince Rupert

7 Dec

Much larger facility to be built if Ottawa approves Malaysian giant’s purchase of Canadian company

By Gordon Hamilton, Vancouver Sun – December 5, 2012

Malaysian Energy giant Petronas and Canadian natural gas company Progress Energy say they are going ahead with plans to develop a $9-billion-plus liquefied natural gas plant at Prince Rupert despite a decision by Ottawa to reject the Malaysian company’s $5.9 billion bid to buy Progress.

The two companies have agreed to proceed with the LNG plant independently of the takeover bid, Progress president Michael Culbert said Tuesday. But the joint venture partners also offered a tempting carrot if Ottawa reconsiders its decision to block the takeover bid: a much larger investment in B.C.’s northeastern gas fields and in its proposed LNG plant.

If Ottawa ultimately approves the takeover, the partners would have sufficient natural gas reserves to expand the size of their LNG plant, to be located on Lelu Island within the port of Prince Rupert, Culbert said.

If the acquisition is approved, “on the LNG side itself it is projected to be about a 60-per-cent increase in capacity,” he said. “That moves the total natural gas supply from 1.2 billion cubic feet per day to 2 billion cubic feet per day.”

He said British Columbia would benefit through the development of a new industry capable of creating investment, jobs and tax revenues.

Energy Minister Rich Coleman welcomed the announcement.

“This could be another positive step forward in the development of B.C.’s liquefied natural gas industry — we are well on our way to having Canada’s first designated export terminal for natural gas,” Coleman said in an email to The Sun. “If this project is approved, it could create up to 3,500 construction jobs and 300 long-term operational positions.”

The joint-venture partners have named the company that is to develop the LNG plant Pacific Northwest LNG. Culbert said the new company is to open an office in Vancouver early in 2013, around the same time it submits its plans to Canadian regulators. Pacific Northwest LNG’s target start-up date is 2018.

“There’s a window and an opportunity for Canada to be a participant, and Progress and Petronas are moving ahead on our joint-venture arrangement . . . . If we can enhance the project economics by increasing the size of it, it just makes that project, and Canada, more competitive,” Culbert said.

The joint-venture partners have completed a feasibility study and are now ready to begin the next phase, referred to as the pre-front-end engineering design phase. The investment is estimated at between $9 billion and $11 billion to build two liquefaction plants, referred to as trains, capable of producing 3.8 million tonnes per train of LNG a year. Pacific Northwest LNG is in discussion with pipeline builders to decide the best option for getting the gas to Prince Rupert.

Industry Minister Christian Paradis blocked the Progress takeover Oct. 19 saying there was no net benefit to Canada in the deal. Petronas is a state-owned energy company but it is also an ideal investor partner for Progress, as it is heavily invested in LNG, operates one of the largest LNG tanker fleets in the world, and has an existing customer chain.

“What we see, starting at the upstream end, whether it be the joint-venture or the expanded case, we are going to have material development of Progress’s lands up along the Alaska Highway of British Columbia. With that, this natural gas development and resource development will then be the feedstock to our LNG project,” Culbert said.

“This is a new industry. This is an industry that provides, really, decades of further jobs, both on the upstream side maintaining the gas supply as well as on the LNG facility maintaining and operating that facility on the coast.

“We see that the job creation is very material, the investment is very material and, ultimately, the revenue from provincial and federal taxes and royalties is also very significant.”

The Petronas-Progress project is the fourth major LNG project planned for B.C.’s northwest coast. None have reached the final investment decision stage and there is speculation that the proponents could consolidate their projects.

The other three are:

– Shell Canada, which has partnered with energy companies in China, Japan and Korea for a $12 billion-plus project at Kitimat.

– The BG Group, which has plans for a plant at Prince Rupert of an undisclosed size and has partnered with Spectra Energy to build a super-size pipeline to the port city.

– KLNG, a consortium of Apache Corp., EOG Resources and Encana, which plans a $5 billion plant at Kitimat. KLNG is already clearing a site and has an LNG export permit.

A fifth, much smaller plant, BCLNG, has been proposed as a joint venture between the Haisla First Nation and LNG Partners of Houston for a $400 million to $600 million project. BCLNG also has an LNG export permit.

Republished from the Vancouver Sun: http://www.vancouversun.com/business/bc2035/Petronas+Progress+announce+ahead+billion+plant+Prince/7649961/story.html#ixzz2ELhNZD3e

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