Petronas weighs sale to exit $27 billion Canada LNG project: sources

Mon Oct 3, 2016 5:46am EDT
 
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By A. Ananthalakshmi and Oleg Vukmanovic

KUALA LUMPUR/MILAN (Reuters) - Malaysian state oil firm Petroliam Nasional Bhd is considering selling its majority stake in a $27 billion Canadian liquefied natural gas (LNG) plant, three people familiar with the matter said this week.

Petronas, as the company is known, said in a statement on Saturday that it "categorically denied" the Reuters report on Friday that the company is considering the stake sale.

"Petronas reiterates that, together with the project partners, it will study the conditions that come with the approval and conduct a total review of the project prior to making a decision on the next steps forward," the company said in a statement on Saturday.

Petronas is weighing options for the project as a more than 50 percent slide in crude oil prices since the middle of 2014 has hit the group's profits and prompted cuts to capital expenditure and jobs.

Amid the cost-cutting, the economics of the Canadian project - which took three years to get approval due to environment concerns - have been called into question as LNG prices have fallen more than 70 percent in two years.

Petronas was given the go-ahead for the C$36 billion ($27.34 billion) project by the Canadian government earlier this week. It said then that executives would study the 190 conditions imposed by the authorities and conduct a review before deciding on the next steps.

The sources said Petronas has been considering a sale for months, after it became apparent that a Canadian approval was possible, but had yet to take a final decision. Other options are also being considered, including putting it on ice.

"They are going to be looking at gas prices, costs and returns before they make the final decision," said one of the sources. "It is a very tough call."   Continued...

 
A logo of a Petronas fuel station is seen against a darkening sky in Kuala Lumpur, Malaysia February 10, 2016.     REUTERS/Olivia Harris/File photo