Petronas’ $36bn LNG project in Canada runs into turbulence

Petronas’ $36bn LNG project in British Columbia, Canada has hit some turbulence in the wake of depressed LNG prices. And the scandals plaguing the Najib administration have not inspired confidence, judging by the readers’ comments in response to online news reports about the project.

This is from the Globe and Mail:

And finally, though it is not implicated in the scandal, Malaysia’s state-owned oil company Petronas – which pays a huge annual dividend to the government and accounts for almost half of Malaysia’s oil revenues – is one of the largest foreign investors in B.C. Petronas, of course, is the company behind the proposed $36-billion Pacific NorthWest LNG project.

Kenneth Courtis, a Tokyo-based former vice-chairman for Goldman Sachs Asia who has advised on large LNG projects in Asia, says a looming supply glut of liquefied natural gas will depress prices for years to come and make Petronas’s B.C. project untenable – and a potential scandal in Kuala Lumpur.

“If it were a commercial company, they might say, ‘We’ve screwed up, we’re going to write this off.’ But with the tremendous scandal that’s shaking the Malaysian government to its foundation – if on top of this, they had their national champion write off [their investment in B.C.], that’s a big deal,” he told The Globe this week, suggesting Petronas would begin to drag its feet, squeeze costs and seek further concessions rather than admit defeat.

Earlier, the Vancouver Sun highlighted a Petronas’ internal audit report which touched on serious safety concerns and training and competency issues in Petronas’ operations in Malaysia, prompting a flurry of negative readers’ comments.

Petronas has reportedly confirmed the negative findings in the 2013 internal audit report but said it had “executed a comprehensive programme to resolve the issues and ensure the safety of our people, environment and our facilities”.

The internal audit report has provided fodder for the BC political opposition:

Opposition New Democrat Leader John Horgan said it appears the government did not do its homework on safety issues surrounding Petronas.

“My primary concern is the government, the B.C. Liberals, bent over backwards to try and accommodate Petronas with respect to taxation, with respect to royalties, and apparently spent no time looking at their environmental record and looking at their health and safety record,” he said.

“That lack of due diligence is shocking to me and should be shocking to British Columbians,” said Horgan.