Canadian government approves Petronas LNG project

natural gas plant petronasRICHMOND (British Columbia): The Canadian government has approved a proposed Petronas-led liquefied natural gas plant in northern British Columbia, ending a three-year wait for a decision.

The Liberal government of Prime Minister Justin Trudeau acted after receiving an environmental assessment that said the project would have significant adverse effects requiring major remedial work.

Malaysian oil and gas company Petronas and its partners had been waiting for a permit for the C$11 billion (RM34 billion) plant.

Petronas, along with partner companies proposed the plant called Pacific NorthWest LNG on a remote island about 725km northwest of Vancouver with a target of starting operation in 2019, according to the plant’s website.

The decision was widely seen as a major test for the Liberals, who must juggle the needs of an energy industry suffering from job losses as well as the concerns of environmentalists, who Trudeau courted in his successful 2015 election campaign.

“The economics (of the project) require much higher LNG prices than currently, and than they are forecast to be for the next few years,” said Wood Mackenzie analyst Alex Munton. “That’s what we think will cause Petronas to pause investment for a period of time until it’s more confident about future gas prices.”

In a statement released after the government decision, Pacific NorthWest LNG said it would conduct a total project review over the coming months prior to announcing next steps for the project.

While approving Pacific NorthWest, Canada imposed 190 legally binding conditions to minimize the environmental impact, including a hard cap on carbon emissions.

Now that Petronas has been granted permission for the plant, it may still decide not to proceed.

The firm has seen a global slump in crude prices squeeze finances, which make up a third of Malaysia’s oil and gas revenue.

Petronas had said in January that it would cut its spending by some US$11.4 billion over the next four years. It is also cutting 1,000 jobs.

Environment Minister Catherine McKenna, who made the announcement on the banks of the Fraser River, flanked by Natural Resources Minister Jim Carr and Fisheries Minister Dominic LeBlanc, said she was confident the project would proceed in the most sustainable manner possible.

The call was a tough one for the Liberals, who had to take into consideration the needs of an energy industry suffering from job losses as well as the concerns of environmentalists, whom Trudeau courted in his successful 2015 election campaign.

The decision may have been easier politically than it seemed, since the chances of Petronas going ahead with the project are seen as mixed at best and approving the plant could help deflect criticisms the Liberals do not support energy development.

Environmental activists said the plant would cause a massive increase in greenhouse gas emissions at a time when Canada looks set to badly miss its existing climate change targets.

“If this project is built as currently approved, it will be one of the single biggest sources of carbon pollution in the country,” said Merran Smith, executive director of Clean Energy Canada.