Excerpt from article found in PGCitizen called Blip or Bust.
"In fact the area where the wannabe petrostate British Columbia has the most to lose is the short term effects on its fevered dreams of liquefied natural gas - yet even here the bust may prove to be a boon. According to FT.com, in a quirk of the markets, the price of LNG destined for Asian markets is linked to Brent. Last Friday, Petronas, the Malaysian state-owned energy giant linked to the most advanced of Premier Christy Clark’s LNG hopes, the proposed Pacific NorthWest terminal project near Prince Rupert, announced a 14 per cent drop in its third quarter profits, according to BNN.com, due to the fall in oil. That affected the company’s ability to pay the dividends the Malaysian government enjoys and thus it said it will cut next year’s capital expenditures by 20 per cent.
That prompted CEO Shamsul Azhar Abbas to say Petronas will be delaying going ahead on the Rupert project, which all told will cost $36 billion; the Canadian Press reported costs need to be lowered on the proposal, especially in light of the trouble with crude. Nevertheless, Abbas and the province struck an optimistic tone Wednesday, with energy minister Rich Coleman saying the project remained a “tremendous opportunity.”
They may not be hoping against hope - falling Brent may have helped Pacific NorthWest and other LNG hopes in three ways. The downward pressure on LNG prices will hurt prospective exporters in the U.S. and Australia. According to Reuters, LNG is also sold in long-term contracts that spans decades - lower prices now make those long term deals more attractive and will blunt a movement in Asia to create a separate market for LNG that would decouple the price from Brent. Abbas cited the attractiveness of those contracts when he said a decision on Rupert had to be made soon because it was “vital… for Pacific NorthWest LNG not to lose out on long term contracts to competitive United States LNG projects.”
The complexity and volatility of the drop shows how life as a petrostate is vapour and danger. B.C. and the Liberals would do well to read the last line of the bumper sticker: “This time I promise not to piss it away.”