BC Political Discussion - BC Election 2017 May 9th

[Stingray2004]

Some further background on the Petronas LNG Consortium - PNW LNG.

They commenced their fed enviro review process back circa April, 2013 with CEAA and said process involves 365 days - 1 year and they were expecting final CEAA enviro certification by ~early summer, 2014.

Unfortunately, the "365-day CEAA clock" became stopped over and over again due to so-called NIMBYs - militant FNs, enviros... even the BC NDP... resulting in numerous "Stopped CEAA Clocks". Tactical delays by these groups resulted in the 1-year process dragging out for ~3 1/2 years until PNW LNG finally received their CEAA enviro certification in September, 2016.

During the interim, PNW LNG became increasingly frustrated as a result:

“The landscape is now one of uncertainty, delay and short vision, “ the then-Petronas CEO Shamsul Abbas announced via an interview with the Financial Times in late September 2014. Among those uncertainties were construction costs, taxes and regulations, threats of legal action from First Nations and delayed approvals from provincial and federal regulators.

Petronas was especially frustrated with the continuous delays in the fed CEAA process.

Back in June, 2015, the Petronas consortium actually sanctioned FID subject to the following:

1. Project Development Agreement (PDA) with provincial gov't; (actually completed and approved by BC Legislature ~ 3 weeks later albeit BC NDP opposed same claiming that BC Libs "were selling the farm")

2. Final fed CEAA enviro certification;

Again, with those 2 matters in hand at the time, shovels would have already been in the ground. The global LNG market was not dissimilar from today's global LNG market, albeit Petronas would have seen commissioning of PNW LNG by late 2020 (based upon a 64-month build-out).

BTW, both the Petronas LNG consortium as well as the Royal Dutch Shell LNG consortium have very similar characteristics and both are the 2 top "economically feasible" LNG front-runners:

1. Both sourced from prolific "wet gas" in NE BC's prolific NE BC Montney basin;

2. Both utilizing a new nat gas mainline from NE BC to NW BC's coast;

OTOH, Kitimat LNG (Chevron/Woodside Petroleum) has much higher CAPEX/OPEX matters as nat gas will be sourced from the Horn River Basin in NE BC - way up in Fort Nelson. Not much nat gas infrastructure thereto and it is a "dry gas" basin.

In any event, when PNW LNG finally received its CEAA enviro certification last September, 2016, Petronas immediately began to request its EPC bidders to re-submit bids and "sharpen their pencils". Of import, is that the fact the Petronas LNG consortium, prior to that, was already within $0.50 - $1.00/MMBtu of its "sweet spot". IOW, its OPEX comfort zone.

Unlike all other LNG exporter countries, BC is also unique in that LNG proponents also must incur extra costs:

1. Carbon tax;

2. LNG export tax;

3. Separate cost-sharing agreements with numerous FNs in terms of the LNG facility as well as FNs located along the proposed NE BC to NW BC nat gas mainline.

All of these comprise additional cost pressures esp. in terms of OPEX for the Petronas LNG consortium - likely made the difference between the $0.50 - $1.00/MMBtu OPEX and "sweet spot" that Petronas required prior to EPC bidders "sharpening their pencils" - not really a material difference.

Also of import is that the prior BC Lib gov't had established very close working relationships with all of the LNG proponents inclusive of PNW LNG. Under different political circumstances, I suspect that Petronas officials, after their new EPC bids, would have met with BC Lib gov't officials in order to "massage" the PDA and give it a "hair-cut' in order for the project to proceed and meet that "sweet spot". Especially important when considering $36 billion will be on the line.

Don't kid yourselves. Petronas officials were also aware of BC NDP "hostility" to their PNW LNG project over the previous years as I outlined in my previous post above and my gut tells me that they pulled the plug as a result of the new GreeNDP gov't. Not a coincidence IMHO. Petronas would never issue an official press release castigating the new GreeNDP gov't esp. when it has roughly $10 billion now invested in its nat gas lands in NE BC.

However, when one Petronas official, Anuar Taib, executive vice-president of Petronas, was asked if the new GreeNDP gov't was a reason for their decision to cancel PNW LNG, he let slip:

“I think (for) the review for projects as complex as our Pacific NorthWest LNG project—every factor has to be considered.

[emphasis added]

Kind of ironic that, tonight, some financial press are speculating that PNW LNG (Progress Energy) is contemplating sending its nat gas to the U.S. Gulf Coast to a newly built LNG export facility.

As for the 34,000 square feet leased by PNW LNG at Park Place (666 Burrard St.) early last year, expect all 50 - 75 staff positions to be terminated shortly and the "Sub-lease" shingle going up concurrently.

In epilogue, I also fully share the sentiments in Mike Smyth's column tonight in the Province newspaper:

Mike Smyth: NDP had nothing to do with Petronas collapse? Really?

The boss of Petronas, the giant Malaysian energy company, says the decision to cancel its $11-billion LNG plant here has nothing to do with the election of an NDP-Green government.

Sure it doesn’t. Go ahead and believe that if you want. But I prefer not to be so gullible.

The NDP was hostile to the Pacific NorthWest LNG project from the start. The party wrote to the Canadian Environmental Assessment Agency last year, urging the megaproject be rejected because it was a threat to salmon stocks.

The NDP continued to rip the project after it was approved: The taxes on it were too low. The company was not hiring enough local workers. The project was not sharing adequate benefits with First Nations.

NDP leader John Horgan _ now the premier _ said in February the plant was “poorly sited” and he would “find a better place and a better way” to build it if the NDP came to power.

“I will deal with those issues after the election,” Horgan said. “I’ve made that clear to the proponents.”

How was the company supposed to take that? The project had already been approved by both the federal and provincial governments, but here was Horgan vowing to “deal” with Petronas if he took over.

During the election campaign, the NDP vowed to increase the carbon tax on the project — a heavy carbon emitter — and to jack up corporate taxes as well.

The NDP also promised a “scientific review” of fracking, the controversial gas-extraction process the project relies on for its gas supply. The NDP talked about tough new environmental regulations and Horgan even refused to rule out a moratorium on fracking, a direct threat to the project’s viability.

But the election of an NDP government has nothing to do with the project being cancelled? Give me a break.

Why would Petronas say the NDP government’s policies played no role in the decision to scrap the project? What else do you expect them to say?

The company has already spent $5 billion developing its natural-gas assets in B.C. It has drilled hundreds of gas wells. It will likely need to work with the B.C. government again in the future. Why tick the NDP off?

Of course, the project could have collapsed if Christy Clark had won the election too. But keep in mind that Rich Coleman, the former energy minister, warned before the election that the project faced difficulties and the Liberals might “restart” talks on the project’s taxation deal with the government.

The chances of the NDP sweetening the deal for Petronas? Less than zero. The New Democrats vowed to do the opposite: Increase taxes and regulations on the project.

So the NDP had nothing to do with the cancellation? Tell me another fairy tale.

http://theprovince.com/news/bc-polit...ollapse-really

Edited to add: some more corroborating opinion:

James Tansey, a business professor at the University of British Columbia, said it is reasonable to conclude that politics led to Petronas’ decision, noting that no other obvious factors beyond the arrival of the NDP in power can explain the timing of the company’s decision.

“The reality is the only real change in circumstance in B.C. has been the change in government,” Mr. Tansey said in an interview. “It may have been the final straw for them.”

https://www.theglobeandmail.com/news...ticle35814915/