Petronas Plans Gas Plant in British Columbia

CALGARY—Malaysia's state-owned energy company Thursday said it would build a large-scale natural-gas plant on Canada's Pacific coast, paving the way for the export of cheap North American gas to high-demand markets in Asia.

The 36 billion-Canadian-dollar (US$29.3 billion) project, known as Pacific NorthWest LNG, marks Canada's emergence as a hub for exporting surplus North American natural gas to Asia. It is the first of nearly two dozen liquefied-natural-gas plants proposed for the Pacific Coast to move ahead with construction.

Petroliam Nasional Bhd., or Petronas, is the lead sponsor of the project, along with minority partners China Petroleum & Chemical Corp., Japan Petroleum Exploration Co., Indian Oil Corp. and Brunei National Petroleum Co. Petronas has said it wants to start up commercial operations in 2019.

"Pacific NorthWest LNG is poised to make a substantial investment that will benefit Canada for generations to come," Michael Culbert, president of Petronas subsidiary Progress Energy Canada Ltd., said in a statement.

The Petronas project has been considered a front-runner and its decision on whether to move ahead with construction has been closely watched by other Canadian LNG project proponents, including Royal Dutch Shell PLC and Chevron Corp.

The decision is conditional on the approval by the British Columbian legislature of a favorable royalty payment plan announced by Premier Christy Clark last month, as well as a positive environmental assessment by the Canadian federal government, which is expected to be issued later this year.

Ms. Clark's government, which has lobbied hard to attract an LNG industry, welcomed the decision as a key driver of future economic growth.

"Developing an LNG industry will result in some of the largest private-sector investments in British Columbia's history, stimulating economic activity throughout our province like never before," Rich Coleman, the province's minister of natural gas development, said in a statement.

Pacific NorthWest LNG plans to ship six million tons of natural gas a year from inland British Columbia to a liquefaction plant to be built on an undeveloped island at the port of Prince Rupert on the province's rugged and remote northwestern coast.

In December, Petronas missed a self-imposed deadline for making a final decision on the project by year-end 2014, citing high development costs and a slump in energy prices. But following the announcement last month of fixed royalty regime, which caps future payments, the company said Thursday that "the required technical and commercial components of the project have been satisfied."

Petronas said it was also working to win over a handful of Native American groups with traditional territorial rights along its proposed natural-gas pipeline route that it hasn't already reached deals with.

Earlier Thursday, Canada's federal government approved a C$1.7 billion TransCanada Corp. plan to construct a 301 kilometer (187 mile) pipeline system designed to feed natural gas from northeastern British Columbia into a larger C$4.7 billion 900-kilometer pipe that will connect to the Petronas LNG project.

Write to Chester Dawson at [e-mail]

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