December 3, 2014 / 11:07 PM / 6 years ago

UPDATE 1-Petronas delays go-ahead for Canadian LNG project, cites costs

(Adds background on project, quotes from Petronas CEO)

By Julie Gordon

VANCOUVER, Dec 3 (Reuters) - Petronas, Malaysia’s state-owned oil and gas company, delayed giving the final go-ahead on Wednesday for its planned investment in a $11 billion liquefied natural gas export terminal in British Columbia, citing high costs and other outstanding issues.

“Costs associated with the pipeline and LNG facility remain challenging and must be reduced further before a positive FID (final investment decision) can be undertaken,” the company said in a statement.

Petronas had hoped to be in a position to green light its Pacific NorthWest LNG project before the end of 2014, but said it still needs more clarity on “substantive items of importance” and is reviewing the impact of declining oil prices on the economic viability of the remote development.

The company warned back in October that the economics of the project were marginal and said it could delay an investment by up to 15 years if outstanding issues around taxation and regulation were not resolved.

While British Columbia has since finalized an LNG tax package and approved both the terminal and pipeline, a federal environmental assessment of the terminal is still underway, with that decision not expected until mid-2015 at the earliest.

More than a dozen LNG projects have been proposed for British Columbia’s Pacific coast, with companies such as Petronas, Royal Dutch Shell and Chevron Corp leading the race to build Canada’s first LNG export facility.

The Canadian projects are also running up against competition from the United States, where two new LNG export terminals are already under construction.

Petronas said despite the delay, it is working with regulators on the necessary permitting and will continue to invest in natural gas development in British Columbia. (Reporting by Julie Gordon; Editing by Peter Galloway and Christian Plumb)

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