KUALA LUMPUR/VANCOUVER, Sept 25 (Reuters) - Malaysian state-owned oil and gas company Petronas said on Thursday it might pull out of a roughly $10 billion liquefied natural gas (LNG) project in Canada due to what it said was the country’s slow progress developing a taxation plan.
Shamsul Abbas, chief executive of Petronas, whose full name is Petroliam Nasional Berhad, said in an interview with the Financial Times that he doubted the company would be able to make a final decision on investing in the project by the end of this year and that the project remains “uncertain”. A Petronas official contacted by Reuters confirmed Shamsul’s comments.
“Canada has to buck up real fast to be a credible global LNG player if it wants to be taken seriously by potential investors,” Shamsul was quoted as saying ahead of a visit to Canada.
Petronas, which has been expanding abroad to shore up future earnings as output slows at home, bought Canada’s Progress Energy Resources in 2012 in a deal worth around $5 billion that gave it shale gas properties in northeastern British Columbia.
It plans to build a LNG terminal near the Pacific Coast city of Prince Rupert, British Columbia, to ship natural gas to energy-hungry Asia. But Petronas has said giving final approval to the project will hinge on whether the British Columbia provincial government spells out a tax regime for the nascent LNG industry before the new year.
British Columbia Premier Christy Clark played down Shamsul’s comments as a negotiating tactic, and said the province continues to work diligently to ensure Petronas’ Pacific NorthWest LNG project goes ahead.
“I can tell you negotiations are never easy,” Clark told reporters in Vancouver on Thursday. “But I am really confident. We’re on track, things are going very well, and we remain very confident we will realize this investment.”
The province’s governing Liberals have promised the taxation legislation will come out in October, and be approved by the legislature by the end of November.
“Petronas needs to be assured that the project is economically viable and satisfies its investment criteria before going ahead with the project,” the company said in a statement to Reuters on Thursday.
It said it will proceed with financing and evaluation as planned until a decision is made.
Petronas has plans to spend about $35 billion over 30 years on developing LNG exports from British Columbia to Asia. That number includes its takeover of Progress Energy and a natural gas pipeline to built by TransCanada Corp.
One of the reasons Petronas is holding back for now is the “lack of appropriate incentives”, Shamsul was quoted as saying.
“Rather than ensuring the development of the LNG industry through appropriate incentives and assurance of legal and fiscal stability, the Canadian landscape of LNG development is now one of uncertainty, delay and short vision,” he said. (Reporting By Trinna Leong in Kuala Lumpur and Julie Gordon in Vancouver; editing by Stuart Grudgings; and Peter Galloway)