Petronas says Pacific NorthWest LNG risks 15-year delay on taxes

By CHRISTOPHER DONVILLE and REBECCA PENTY

Bloomberg

Petroliam Nasional Bhd., Malaysia’s state-owned energy company, said it may delay construction of its C$10-billion ($8.9 billion) Canadian LNG project past 2030 unless proposed taxes are lowered this month.

The company, known as Petronas, needs the Canadian government and province of British Columbia to commit to lower taxes by the end of October to meet its mid-December target for a decision on the shipping terminal, CEO Shamsul Azhar Abbas said Oct. 6 in an emailed statement. The project is scheduled to start operating in 2018.

“In our last portfolio review exercise, the current project economics appeared marginal,” Shamsul said. “Missing this date will have the impact of having to defer our investments until the next LNG marketing window, anticipated in 10-15 years.”

Petronas and global rivals including Royal Dutch Shell Plc and Chevron Corp. are considering exporting gas from Canada’s Pacific Coast in liquid form to meet rising demand in Asia. They are pressing Canada’s westernmost province of British Columbia and the federal government for financial terms that would justify making multibillion-dollar investments.

Costs to develop LNG are higher in Canada than elsewhere because of the tax proposals, pace of regulatory reviews and as local contractors charge more than in other countries, Shamsul said.

Tax Regime

Shamsul’s statement comes as British Columbia’s legislature prepares to start a new session, during which the government has committed to finalizing an LNG-specific tax regime and also plans to introduce a policy on emissions from the shipping terminals.

British Columbia Premier Christy Clark is confident Petronas will decide to proceed with the project, known as Pacific NorthWest LNG, she said last week after meeting with Shamsul in Vancouver. The meeting followed similar warnings about the viability of the Canadian LNG project by Shamsul in an interview with the Financial Times of London.

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