Malaysia's Petronas to take 25 pct stake in LNG Canada

Roman Schwartz
June 2, 2018

Shell and its equity partners behind LNG Canada, a joint venture steering a liquefied natural gas project planned for British Columbia's port city of Kitimat, said Petroliam Nasional Berhad, better known as PETRONAS, is taking a 25 percent stake in the project.

Should the purchase go ahead (subject to regulatory approvals and closing conditions) it would make Petronas the second-largest equity owner in the project, behind Shell with 40 per cent, the remainder held by PetroChina with 15 per cent, Mitsubishi Corporation with 15 per cent and Kogas Canada with 5 per cent.

Shell will continue to be the biggest owner in LNG Canada, holding a 40 per cent stake.

A report by Bloomberg noted that after Petronas cancelled its plan to invest in the Pacific NorthWest LNG project last July, the group was left without a plan to export gas produced by Progress Energy Canada unit to Asia as originally intended. The LNG Canada project, which reportedly costs of up to C$40 billion for the construction of an export terminal and related infrastructure, is led by Royal Dutch Shell plc (Shell) as the largest partner.

"It is anticipated that the transaction will achieve completion in the next few months", Petronas said in a statement.

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"We expect the global LNG market to tighten post 2022 and this bodes well for the project", he added. Other partners include PetroChina, Mitsubishi's Diamond LNG and Korea Gas. "The timing and outcome of a FID will be decided by joint venture participants based on global energy markets, and the overall competitiveness and affordability of the project", Shell said, in a separate statement. LNG Canada and Woodfibre LNG have both stated that Canada does not have the expertise to build the large LNG modules needed to chill natural gas to below 160 below Celsius, and have appealed to the federal government for exemptions. Buying into the LNG Canada project would therefore help revive that prospect. "LNG is just one of those opportunities", said Petronas president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin in a release.

The move in by PETRONAS, however, does not put the project closer to a final investment decision.

The Shell-operated project will initially consist of two LNG processing units, each with the capacity to produce about 6.5 million tonnes per year of LNG, with an option to double the project in the future.

The consortium had already sunk billions into developing the natural gas fields in the northeast B.C. interior.

With nearly 52 trillion cubic feet of reserves and contingent resources, Canada is the second-largest resource holder in Petronas's portfolio, trailing only Malaysia, said Prasanth Kakaraparthi, a senior analyst at Wood Mackenzie.

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