Malaysia’s Petronas reported it will take an equity position in LNG Canada, in Kitimat, BC, on Canada’s west coast, through its wholly owned entity North Montney LNG LP (NMLLP).
If approved and on closing of this deal, ownership interests in LNG Canada would be Shell Canada Energy 40%, Petronas (through NMLLP) 25%, PetroChina Kitimat LNG Partnership 15%, Mitsubishi Corp. subsidiary Diamond LNG Canada Ltd. 15%, and Kogas Canada LNG Ltd. 5%.
LNG Canada recently selected the joint venture of JGC Corp. and Fluor Corp. as the engineering, procurement, and construction contractor for the project and is currently finalizing materials in preparation for a final investment decision by joint venture participants.
The transaction announced today does not amount to an FID, which remains pending.
“This marks an interesting turn of events after Petronas cancelled its $36-billion (Can.) Pacific North West project in July 2017,” commented Prasanth Kakaraparthi, senior analyst with Wood Mackenzie. “With nearly 52 tcf of reserves and contingent resources—Canada is the second-largest resource holder in Petronas’ portfolio after Malaysia. Consequently, monetization through LNG is inevitable given the weak outlook for domestic prices,” Kakaraparthi said.
He noted, “Costs will be a major concern for the project. Shell has announced its intent to make a decision by end of this year. But before LNG Canada can take FID, it will need to lower costs and take advantage of the latest tax breaks announced by the BC government.”
