Petronas subsidiary Pacific NorthWest LNG (PNW LNG) announced Tuesday that its proposed $36 billion liquefaction plant in Port Edward, British Columbia has been canceled.
The consortium cited a "careful and total review of the project amid changes in market conditions." Pricing on the benchmark Tokyo LNG spot index has hovered stubbornly in the range of $4 to $8 per mmbtu since 2015, well below the trading range when Petronas' project was launched. Industry analysts have long warned that an oversupply of LNG in the Pacific basin market could make the many B.C. liquefaction plant proposals uneconomical. UK-based Cambridge Energy Associates estimated in 2015 that Canadian LNG terminals would require gas prices in the range of $10-$11 per mmbtu to become profitable.
“The global price of LNG is the big deal, and nobody in their right mind would proceed with a project like this," said Canadian energy analyst David Hughes, commenting to BC outlet The Tyee on Tuesday.
PNW LNG also emphasized the economic factors behind the cancelation. "We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision," said Anuar Taib, chairman of the PNW LNG board. “PETRONAS and its North Montney Joint Venture partners remain committed to developing their significant natural gas assets in Canada," he said.
PNW LNG president and CEO Adnan Zainal Abidin acknowledged all the hard work and collaboration that had gone into the project to date. “Without everyone’s support and involvement, we would not have achieved the many key milestones for the project, including agreements with the area First Nations, the BC environmental assessment certificate and the Canadian environmental assessment approval," he said.
In addition to economic factors, litigation and political opposition may have contributed to the project's demise. B.C.'s incoming NDP government had pledged to lower the province's CO2 emissions – a goal that experts claimed would be impossible if PNW LNG proceeded. Climate policy expert Kathyrn Harrison estimated that the plant would create emissions of about 10 million tonnes of CO2 per year, or roughly three-quarters of the entire province's emissions target for 2050. The B.C. Green Caucus, which opposed the project, hailed the cancelation and called for investment in "opportunities in the emerging economy" rather than in natural gas.
Despite low prices and rising production in the Pacific basin, Petronas is proceeding with two floating LNG (FLNG) facilities off Sabah, Malaysia. The first vessel shipped its first cargo in April – a world first – and the second vessel is due to come online in 2020.