Monday, December 15, 2014

Oil prices and Malaysian issues may determine fate of Lelu Island project

The LNG narrative for British Columbia seems to have any number of twists and turns to the story and as we've outlined in the past, many of the decisions that will have an impact on developments on the North Coast are based on events far from Northwest British Columbia.

The latest developments on the Petronas file involve a combination of the drop in oil prices and Malaysian politics, with a report in the Financial Post that outlines those twin themes in the Petronas LNG story. 

Conditions which are coming together, as the parent company of Pacific NorthWest LNG continues its review of the Lelu Island project.

In early December, Petronas announced it was deferring its plans for the North Coast while it looked for ways to make the project a more cost effective option.

However, some of the material assembled by Ng Weng Hoong for the Financial Post highlights the nature of some of the larger issues ahead for the project.

Among some of the key points from today's review:

Despite the hard work already in place by Petronas, the Canadian project is not the most vital component of their global supply strategy.

The impact on the global LNG scene from a very competitive neighbour in the USA, which is making major strides in its own LNG development projects and changing the dynamic for some of the Canadian proposals.

Political pressure in Malaysia, where reduced earnings from lower oil prices could soon provide for criticism of the ambitious international projects that Petronas has put forward in recent months.

Perceived struggles with the proposal owing to a lack of experience with North America's regulatory, aboriginal, labour and environmental challenges.

The soon to expire three year term of employment in February of 2015 for CEO and President Shamsul Azhar Abbas, who according to the Financial Post review, has had some of his moves on reform of the company questioned by a range of interest groups.  Should Mr. Abbas not have his term extended in February, some observers suggest that his successor could re-evaluate some of his international projects.

All however may not be lost for those hoping for progress on the Pacific NorthWest project, one analyst interviewed for the Petronas overview, suggests that the company will evaluate the project further, once oil prices stabilize.

You can review the full Financial Post article here, it makes for a fascinating look into some of the major internal issues of a large international corporation and how as conditions change, highly anticipated projects can rise and fall on corporate agendas.

Today's article is of course not the final word on Lelu Island, there could still and most likely will be, any number of directions that the proposed development could yet move towards, before any final investment decision is announced.

An announcement that is anticipated for sometime in the next three to six months.

Still today's look into developments in Malaysia, does offer up a glimpse into the factors that could have a major effect on the LNG picture for the North Coast.

For more background on the Pacific NorthWest LNG project see our archive page here.

No comments:

Post a Comment