KUALA LUMPUR (Aug 2): Petroliam Nasional Bhd (Petronas) is said to be considering delaying a Canadian liquefied-natural gas (LNG) project over concerns about oversupply and cheap competing fuels, according to the Wall Street Journal (WSJ).
Citing two people familiar with the matter, WSJ reported today that Petronas has so far put up about a third of the estimated US$27.5 billion cost of the Pacific NorthWest LNG project in British Columbia, which will liquefy and export natural gas.
The plan is to begin commercial operations in 2019, according to the Pacific Northwest Website.
The Canadian government is weighing approval for the project. The next step, said WSJ, would be for Petronas and its partners — Brunei National Petroleum Co, China Petroleum & Chemical Corp, Indian Oil Corp and Japan Petroleum Exploration Co — to confirm the final investment decision.
In calculating the project-price estimate, Petronas has said it included what it paid in 2012 for Calgary-based Progress Energy Resources Corp, which will produce the gas, as well as the cost of the proposed two liquefaction plants, marine terminal, pipeline and storage tanks.
The two sources told WSJ that the oversupply of LNG and lower oil and gas prices, have rendered the project unattractive at the moment. However, they declined to say as to how long the delay might be.
“Other companies have already pushed back big LNG plans. Anglo-Dutch giant Royal Dutch ShellPLC said last week that it was deferring a final investment decision on an export facility in Lake Charles, Louisiana, after earlier in July, doing the same for an export project in Kitimat, British Columbia,” the paper wrote.
It noted the prolonged downtrend in crude oil prices has taken a toll on Petronas, the national oil company, which is also Malaysia’s only Fortune 500 company.
In Petronas' profit after tax (PAT) for the first-quarter ended March 31, 2016 (1QFY16) tumbled 60% to RM4.57 billion ringgit, from RM11.4 billion ringgit a year ago; while revenue declined 25.77% to RM49.13 billion, compared with RM66.19 billion previously.
The group had attributed its weak PAT to lower prices across all products and higher net impairment on assets, which was partially offset by lower product and production costs, and the impact of favourable foreign exchange rates.
Petronas is expected to announce its second quarter results on Aug 22.