Huge Petronas Canada LNG project runs into further delays over environmental assessment study

OTTAWA/VANCOUVER/KUALA LUMPUR – A significant liquefied natural gas export project in Canada ran into another delay on Saturday once the federal environmental assessment agency was granted an extra 3 months to finish an impact study.

Ottawa did though invest in announcing a final decision around the project this season, which may end a long-running saga for Malaysia’s state-owned oil giant Petronas.

The firm and its partners happen to be waiting nearly 3 years for a permit to build the Pacific NorthWest LNG facility in northern Bc, on the Pacific coast.

News from the latest delay broke on Saturday, when federal Environment Minister Catherine McKenna decided to the Canadian Environmental Assessment Agency’s request the extra three months.

The CEAA – which had been due to deliver its report to McKenna by March 22 – said it needed more data from the project’s backers after they paid a series of documents and observations on March 4.

A spokeswoman for McKenna said the government cabinet would announce a decision three months following the backers had handed over the requested additional information.

The ambitious intend to build Canada’s first LNG export terminal faced challenges from the start, including controversy over its chosen site, which local aboriginal and environment groups said would destroy a vital salmon habitat.

It is also the first major project with an environmental assessment completed under new rules that include the outcome of upstream production on project emissions.

A spokesman for Pacific NorthWest did not immediately react to a request for comment.

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Petronas, battling a profit-sapping slump in prices that could produce heavy losses, can ill manage to splurge on future supply.

But neither will it afford a lengthy and inconclusive process with authorities in Canada, in which the project is viewed as an evaluation of Prime Minister Justin Trudeau’s green credentials.

Trudeau’s Liberals found power last November promising to do a much better job of protecting the environment compared to previous Conservative government.

But the Liberals, who say Canada must cut emissions of greenhouse gases, are also under pressure to push through approvals of projects within the energy sector, which is losing jobs because of the slump in gas and oil prices.

“The company has requested additional information from the proponent in order to see whether the project is likely to cause significant adverse environmental effects,” it said within the statement.

The request more time to accomplish the outcome study raises the prospect of more conditions on construction. This might just make the work economically unviable, analysts say, leaving Petronas to create off billions already invested.

For Petronas, and Malaysia, the conditions have changed dramatically because it launched the work, long considered a front-runner among dozens proposed for British Columbia.

Gas costs are currently a quarter of 2014’s peak. Last month, Petronas cut jobs and announced some US$12 billion in spending cuts over the next 4 years – exactly the same sum analysts estimate it has sunk in to the Canadian project.

And Malaysia’s economy too is cooling, dampened by China and a domestic financial scandal. Petronas is among the country’s biggest employers and makes up about nearly a third from the government’s oil and gas-related revenue.

The stakes will also be high for Canada, which is trying to kick start the neighborhood LNG industry, said Wood Mackenzie analyst Chong Zhi Xin, speaking before Saturday’s announcement.

But those ambitions come as Trudeau promises to transform Canada’s environmental image. If built, environmental campaigners say the Petronas project would tarnish that.

? Thomson Reuters 2016