LNG Canada project lets Petronas monetise reserves

Project will allow Petronas to utilise gas resources in Canada while global market outlook is bullish

By MARK RAO / Pic By TMR File

The multibillion dollar LNG Canada project is timely to meet the long-term demand for liquefied natural gas (LNG) and allows Petroliam Nasional Bhd (Petronas) to monetise its Canadian gas reserves.

Valued at US$31.9 billion (RM132.11 billion) and located at Kitimat, British Columbia, in Canada, the LNG project secured its final investment decision (FID) on Tuesday with Petronas holding a 25% interest via its unit North Montney LNG Ltd.

Fitch Solutions Inc oil and gas analyst Peter Lee said the project will allow Malaysia’s national oil company to utilise its substantial gas resources in Canada while the global market outlook for LNG is bullish.

“This makes sense for Petronas as it now puts the firm on track to monetise its substantial gas resources in Canada (North Montney) reportedly amounting to some 52 trillion cu ft,” he told The Malaysian Reserve.

“The timing of the project in the context of our outlook for the global LNG market is good as we see a significant supply deficit emerging in the market from the mid-2020s, which is when LNG Canada is expected to be completed.”

Lee said much of the LNG demand created today is “relatively sticky” and the research firm holds a bullish outlook on consumption over the long term.

“Combined with the collapse in LNG investment over recent years, this signals a supply crunch set to emerge in the next decade unless more pre-FID projects are moved to development.”

LNG Canada reaffirms Petronas’ commitment to its business in Canada after having to abort its multibillion Pacific North West LNG last year as the cost of the investment did not justify the potential returns.

LNG Canada holds Petronas’ second-largest gas reserve after Malaysia and has proven resources of up to 22 trillion to 23 trillion cu ft. Petronas also owns Progress Energy Canada Ltd, which has gas reserves in Canada.

Petronas president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin said the project is the first of its kind in the country and will strengthen the group’s LNG supply portfolio to Asian markets.

Canada Prime Minister Justin Trudeau hailed the project as the biggest private investment in the country’s history.

The other joint-venture partners in LNG Canada include Royal Dutch Shell plc, PetroChina Co Ltd, Mitsubishi Corp and Korea Gas Corp, through their respective subsidiaries.

Shell holds the largest stake at 40% via its affiliate Shell Canada Energy.

The investment decision comes after Petronas committed to paying RM24 billion in dividends to the Malaysian government this year.

This follows the company’s net profit jumping 94% yearon- year (YoY) to RM13.6 billion for the second quarter ended June 30, 2018. Revenue rose 5% YoY to RM59.2 billion over the same period on higher average realised prices.

The LNG Canada project will be a large-scale LNG export facility, initially consisting of two liquefaction processing units or trains with a total production capacity of 14 million tonnes per annum with two additional trains potentially to be added in the future.

Construction will reportedly commence this year with the export terminal expected to be in service by 2024.