Progress, Petronas move to design phase for LNG export proposal in Canada
By JUDY MCKINNON and CHIP CUMMINS
Progress Energy Resources Corp. and Malaysian state-run energy giant Petronas said Tuesday they are moving their proposed liquefied-natural-gas (LNG) export terminal off Canada's west coast into the next phase of engineering.
The big energy companies, which are awaiting Canadian government approval for their multibillion dollar tie-up, said a detailed feasibility study for the proposed facility has been completed and the project is now moving into the pre front-end engineering design, or pre-FEED, phase.
The companies said a final investment decision on the project, named Pacific Northwest LNG, is expected in late 2014, followed by first LNG exports in 2018.
The decision to move to the next phase comes as the two companies await Ottawa approval for Petronas' $5.18 billion Canadian dollar ($5.21 billion) offer to buy Progress Energy.
That deal, announced in June, requires approval from the Canadian government, which reviews all big foreign deals for "net benefit" to the country's economy.
Michael Culbert, president and CEO of Progress, said Tuesday he remains confident the takeover of his company by Petronas will get Canadian government approval and that he's "hopeful" this approval will happen by the end of this year.
Mr. Culbert said in an interview that the proposed LNG export terminal will go ahead even if the merger doesn't.
At the time of the deal announcement, the two companies said as part of the tie-up they would jointly develop an LNG terminal in British Columbia, aimed at exporting natural gas to Asian markets.
Amid a gas-drilling boom in North America, gas prices have plummeted across the continent. That has sent a number of other big energy companies scrambling to propose LNG export projects.
Petronas is already a global leader in LNG technology, and Canada's federal government has been eager to push infrastructure that would open its natural resources to new markets, particularly energy-hungry ones in Asia.
The now-completed, preliminary feasibility work on the Petronas-Progress LNG export terminal could become a factor in Ottawa's review, if it is seen as tipping the balance over net benefit to the economy.
In their joint statement, Petronas and Progress said the value of the investment in the LNG export facility is expected to be between C$9 billion and C$11 billion, depending on the final project scope. The construction phase would result in up to 3,500 direct jobs and the long-term operations of the facility would result in 200 to 300 direct jobs, the companies said.
The companies said the size of the project will depend on government approval of the takeover. If approved, "the throughput of natural gas at the LNG export facility is expected to increase by approximately 60%," the companies said in their joint statement.
Canada's Industry Ministry declined to comment about the joint Petronas-Progress announcement, reiterating the Minister, Christian Paradis, continues to review the proposed takeover deal.
Dow Jones Newswires
-Alistair MacDonald and Paul Vieira contributed to this article.
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