Petroleum Brunei joins Petronas’s B.C. natural-gas project

Sunday, December 8, 2013
The Globe and Mail

Another international player has joined a joint venture to export B.C. liquefied natural gas, the latest move to pump up Canadian LNG projects amid competitive pressures from south of the border.

Petroleum Brunei has signed on as a new partner in Malaysian energy giant Petronas’s fledgling B.C. LNG project. But analysts caution that Canada lags behind the United States in the race to export North American LNG to Asia.

Petroleum Brunei is acquiring a 3-per-cent stake in the Pacific NorthWest LNG project led by state-owned Petronas. Earlier this year, Tokyo-based Japan Petroleum Exploration picked up a 10-per-cent interest in Pacific NorthWest LNG.

After the Brunei transaction closes, Petronas’s stake in the project will stand at 87 per cent. The Malaysians have been on the hunt for new partners to help with the massive LNG development planned for Lelu Island, near Prince Rupert in northwestern British Columbia.

As part of the deal, Petroleum Brunei agreed to buy a 3-per-cent share of Pacific NorthWest LNG’s output for at least 20 years. Petroleum Brunei is also scooping up a 3-per-cent stake in Progress Energy Canada Ltd.’s northeastern B.C. natural gas assets.

Petronas bought Calgary-based Progress last year for $5.2-billion. Progress president Michael Culbert welcomed state-owned Petroleum Brunei aboard as a strong partner and investor.

Pacific NorthWest LNG president Greg Kist said the LNG joint venture is positioned to lure additional international investors in 2014.

A report by RBC Dominion Securities Inc., however, warns that the United States holds the lead over Canada in the early stages of the competition to export North American LNG. RBC analyst Greg Pardy and his colleagues pointed out that four U.S. energy projects being retrofitted will have huge capacity to export LNG: Sabine Pass in Louisiana, Freeport LNG in Texas, Lake Charles in Louisiana and Dominion Cove Point in Maryland.

At least 10 LNG projects have been proposed for northwestern B.C.

Industry experts say the proponents are in a race within Canada, and there room for only three or four West Coast projects at most as the B.C. proposals face stiff global competition to deliver LNG to Asia.

Judith Dwarkin, chief energy economist at ITG Investment Research, said in an interview that northeastern British Columbia has an abundance of natural gas that could be piped to LNG export terminals proposed for the Prince Rupert and Kitimat regions.

The notable shale-gas plays in northeastern British Columbia are Montney, Horn River, Liard and Cordova.  “It is certainly taking a long time for some of these B.C. projects to find buyers for the LNG,” Ms. Dwarkin noted.

The RBC report noted the array of B.C. LNG proposals, including Kitimat LNG, a 50-50 joint venture between the Canadian units of Chevron Corp. and Apache Corp., which are seeking Asian buyers for LNG. In contrast, the LNG Canada project headed by Shell Canada Ltd. already has Asian partners that have agreed to buy LNG – PetroChina, South Korea’s Kogas and Japan’s Mitsubishi Corp.

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