Prince Rupert LNG terminal developers pull back

A multi-billion dollar project to build an LNG export terminal on Lelu Island near Prince Rupert, B.C. is now in doubt. Petronas Corporation has said it will delay its final decision on whether to go ahead with the Pacific Northwest LNG export terminal, and part of the reason is that the front-end engineering and design bids so far have been too expensive. The terminal would be used to export liquefied natural gas from northeastern B.C. to markets in Asia.

A report on December 4 by Brent Jang in the Globe and Mail said that Petronas, a Malaysian company, is pressing for B.C. engineering firms to go offshore for engineering labour to bring their prices down. The project amounts to $3.4 billion in spending in Canada, of which 88% is estimated to be related to engineering related services.

According to the article, subcontractors are being asked to review their costs “for an array of building plans, ranging from a work camp in Port Edward to a suspension bridge designed to avoid harming salmon habitat in Flora Bank.”

In a related story, B.C. is reportedly opposing attempts by steel manufacturers from Ontario to have Ottawa impose high tariffs on imported rebar. Rebar is one significant part of the costs of building the Pacific Northwest LNG terminal so an imposition of duties would raise the costs of building it even higher. The Globe and Mail reports that the project would require about 11,000 tonnes of the steel.

Petronas cites declining oil prices as one reason their decision on whether to go ahead with the Pacific Northwest LNG project is being deferred. The project received environmental approval from the province recently, but still needs federal environmental approval.

In a press release on December 3, Petronas wrote: “Petronas and its partners have decided to defer the project’s $36 billion Final Investment Decision (FID) pending further clarity on substantive items of importance to ensure that critical project components align with economic viability of the Project and competition from other LNG producing countries. Costs associated with the pipeline and LNG facility remain challenging and must be reduced further before a positive FID can be undertaken.”

To read reports in The Globe and Mail, click here.

and here