CALGARY, Alberta (Reuters) - Transcanada Corp (TRP.TO) has secured shippers’ commitment for a pipeline associated with Malaysian state-owned oil company Petronas’ pending Pacific NorthWest liquefied natural gas (LNG) terminal in western Canada and targets 2018 for construction, the company said on Monday.
Government construction approval will allow the company to start building most of the North Montney Mainline before majority owner Petroliam Nasional Bhd, or Petronas, decides whether to commit to the project, TransCanada said in a statement.
The pipeline, however, is independent of Pacific NorthWest and “should not be interpreted as changing any aspect of the decision process,” spokesman Shawn Howard said in a statement.
North Montney was to provide gas to Pacific NorthWest, but it also connects to existing systems to serve a wide range of markets.
“This includes deliveries to the oil sands, local distribution companies, eastern Canada, the U.S. Midwest or to California,” Howard said.
Canadian gas producers have been increasingly squeezed from the lucrative eastern market by U.S. rivals, which have lower transportation costs, and have been looking for growth in the Asian market through LNG exports.
But while the Canadian government has green-lit the C$36 billion ($27.25 billion) Pacific NorthWest project in northern British Columbia, Petronas has put off a decision on whether to proceed with it.
Asked on Monday whether Petronas has given TransCanada any assurances on commitment, Pacific NorthWest referred questions to Progress Energy Canada Ltd, a subsidiary of Petronas, which said it supports North Montney.
Progress did not provide details on Petronas’ investment decision or its timeline. The state oil company did not immediately respond to a request for comment.
Canada’s approval for the project came last year after a three-year wait. Analysts have been skeptical about its prospects, given current low gas prices and cost-cutting at Petronas.
The project has also faced opposition from environmental and aboriginal groups, some of which have sued.
Late last year, media reports said Petronas had identified a new location for the plant to cut costs and address environmental concerns. But the company has been mum about its intentions, saying only that it will study market conditions before determining its next steps.
TransCanada in its statement said construction will cost about C$1.4 billion ($1.05 billion), and it has secured 20-year contracts with 11 shippers for approximately 1.5 million gigajoules per day of gas.
“TransCanada plans to begin construction in the first half of 2018, with facilities being phased into service over a two-year period, beginning in April 2019,” the company said.
TransCanada was previously granted government approval for North Montney on condition of a positive final investment decision on Pacific NorthWest.
Privately held Black Swan Energy Ltd confirmed it will be a shipper on North Montney.
Reporting by Ethan Lou; Editing by Dan Grebler and Leslie Adler