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VANCOUVER — Petronas has delayed making a final investment decision on plans to export liquefied natural gas from British Columbia, warning that estimated construction costs are too high.
The Petronas-led Pacific NorthWest LNG terminal proposed for Lelu Island has been budgeted to cost $11.4-billion, part of a $36-billion undertaking to ship LNG from the West Coast to energy-thirsty customers in Asia.
But Pacific NorthWest LNG warned Wednesday that pipeline and terminal engineering costs estimated so far make the Canadian LNG project uneconomic, especially against a backdrop where the Malaysian energy giant needs to scrutinize capital spending because it is being hurt by plunging oil prices.
In postponing the project decision, Petronas may be seeking to squeeze prospective suppliers’ bids on the project in hopes of nudging the project closer to being launched. Still, the delay raises the possibility that another major resource project in Canada could be sidelined, following a string of planned oil pipelines that have run into political and environmental opposition.
The window of opportunity for LNG exports from Lelu Island is closing, Pacific NorthWest LNG president Michael Culbert said in an interview. “We have LNG cargoes that are committed for early 2019 and it is important to keep them on track,” he said. “Canada has to be competitive with U.S. supplies.”
Mr. Culbert declined to specify a new target date for a final investment decision, which had been set for mid-December. Industry observers say it could take until the early spring of 2015 for a decision, though any further delays will place the project at risk of being suspended.
Despite the challenges, Mr. Culbert said the project located near Prince Rupert could still get the go-ahead. “We need every piece of the cost component nailed down,” he said.
Pacific NorthWest LNG selected three global engineering contractors in May, 2013, to take part in a competitive process for the LNG project’s front-end engineering and design, or FEED.
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