PETRONAS cancels Pacific NorthWest LNG

PETRONAS and its project partners have decided to cancel the vast US$28bn Pacific NorthWest LNG project near Port Edward in British Columbia, Canada.

The Malaysian oil giant said that the decision had been made by the project partners, which include Japan Petroleum Export Corporation (JAPEX), PetroleumBRUNEI, IndianOil Corporation (IOC) and Sinopec-China Huadian, following “a careful and total review” of the scheme in light of changing market conditions. 

The project partners thanked the supporters of the project, including the First Nations which had supported it, the district of Port Edward and the city of Prince Rupert.

The Canadian government had formally approved the project in September last year following an extensive assessment, concluding that it represented a major opportunity to grow Canada’s economy. The Canadian Environmental Assessment Agency found that the adverse environmental effects were justified in the circumstances, though it imposed more than 190 legally-binding conditions to protect the environment and strict emissions limits.

Analysts told media outlets that the main reasons for the cancellations are likely to have been the rising costs of developing the project and the current overcapacity in the LNG market.

“There is simply too much LNG export capacity planned in North America and cancellations, especially of Canadian projects, are likely to continue," Muhammed Ghulam, associate of equity research at Raymond James in Houston, told Bloomberg.

Reaction to the news has been mixed. Some Canadian First Nations which had supported the project are dismayed. The chief of the Kitselas First Nation, Joe Bevan, told the Globe and Mail that the cancellation was a serious economic blow and a “lost opportunity” for the whole region, which could have created up to 100 jobs. The mayor of the Lax Kw’alaams band, John Helin, would say only that he was still digesting the news. British Columbia’s energy minister, Michelle Mungall, told the paper that the government would be engaging with the affected communities. The government, which has been in power for only a week, said that it remained committed to developing the province’s gas resources.

Environmental groups have welcomed the news. Canada’s Wilderness Committee, which has campaigned hard against the Pacific NorthWest LNG project on behalf of a number of groups including some First Nations, said that the cancellation of the project was “a massive win for communities on the Skeena River and the global climate”. The group claimed that the scheme would have produced 11m t/y of carbon emissions and destroyed salmon habitats.

“We’re absolutely thrilled that the Malaysian backers of this liquefied natural gas terminal have backed down from their reckless plan to jeopardise BC’s second largest salmon run and blow our provincial climate targets,” said Peter McCartney, climate campaigner for the Wilderness Committee, adding: “It’s very clear now that British Columbians should not stake our future on a liquefied natural gas industry. We need to embrace the future — renewable energy and clean technology — and quit clinging to the fossil fuel industry.”