National oil company Petroliam Nasional Bhd (Petronas), is weighing options to develop and monetise its gas resources in Canada after shelving the plan for a multibillion dollar liquefied natural gas (LNG) project in British Columbia.
Executive VP and CEO for upstream, Datuk Mohd Anuar Taib, said among the possibilities under consideration would be investing in a pipeline to connect and market its gas resources from an area which has 22.3 trillion cu ft (TCF) of proven unconventional gas to the rest of Canada and North America.
Petronas’ gas resources are located in the North Montney area and are operated by unit, Progress Energy Canada Ltd. The area has been producing gas since 2012, supplying to the Canadian market, which has demand of 14 billion standard cuft (BCF) a day — roughly seven times that of Peninsular Malaysia.
“We are now looking at the possibility of working together with partners or parties to look at a pipeline that could be built to connect that area to the rest of the Canadian market,” he told Bernama.
The pipeline, if it materialises, could give Petronas access to the rest of the North American market, which has a size of about 84 BCF a day, or roughly 40 to 41 times, that of Peninsular Malaysia.
“So, now the story in Canada becomes ‘we (Petronas) have significant proven resources, sitting in one of the largest markets in the world and there must be ways for us to monetise those resources’,” he said.
As a comparison, he said, Petronas’ unconventional Canadian gas acreage represents an area approximately twice the size of Melaka with resources roughly 30%-35% that of Malaysia’s proven gas resources.
Mohd Anuar said Petronas’ North Montney asset in the British Columbia province, currently produces about 600 million standard cu ft per day of gas for the local market.
“For the first-half of this year, we have generated revenue of about C$260 million C$270 million (RM897 million-RM932 million) out of that production,” he said.
Looking at potential returns from the Canadian operation, Mohd Anuar said, Petronas mulls ramping up output and such an option is still in the feasibility study stage.
“I don’t think we are going to do these (things) next year. We’re just going to study, making sure that we do it right.
“When you know the market is depressed, margin is also thin, whatever investment that we want to do, we must be able to do it with a lot more thinking and planning and making sure that value is not lost. So, that is the kind of Canadian story for us,” he said.
He said Petronas must make an effort to cut production costs to remain competitive in the market.
“The key there (North America) is about how competitive can we be in that market. So, our team in Progress Energy Canada (Petronas’ Canada subsidiary) has been doing a lot of improvement efforts,” Mohd Anuar said.
Progress Energy Canada managed to reduce between 12% and 15% of production costs in the last two to three years and is pushing for more to remain competitive, he said.
In 2012, Petronas acquired a 50% working interest in Montney shale assets from Progress Energy Canada for C$1.07 billion, marking its entry into the Canadian unconventional gas play.
It later pursued the entire stake in Progress Energy Canada for approximately C$6 billion, followed by a purchase of Talisman Energy’s North Montney asset for C$1.5 billion, making it one of the largest natural gas reserves owners in Canada with approximately 323,748ha of largely contiguous mineral rights and over 52 TCF of reserves and contingent resources.
Last month, Petronas announced its decision not to proceed with the C$36 billion Pacific Northwest LNG project, which was meant to produce 12 megatonnes of LNG per year, due to the prolonged weak LNG market which is forecast to extend until 2023.