The real reason for the Petronas delay


#1

theglobeandmail.com/report-o … e21960284/

*Petronas plans to push contractors to shift more engineering work for a proposed B.C. liquefied natural gas venture to lower-cost centres offshore as the Malaysian energy giant squeezes suppliers.

“We believe that the deferral is more of a negotiating tool than a reassessment of the viability of the project,” TD Securities Inc. analyst Scott Treadwell said in a research note Thursday. Another factor for Petronas to consider in 2015 is whether Ottawa will be granting any relief to Canada’s fledgling LNG industry, notably through possible tax concessions related to asset depreciation rates, he said.*

Petronas won’t be able to start the project anyway until they get federal environmental approval in mid-2015, so they are using the next few months to extract concessions from the federal government and from their suppliers. Looks like this project will happen.


#2

^^
This is exactly why they are delaying…they have invested billions already and have started construction on their work camps already for this project. Why say yes in December when they can exert more pressure for a few more months…especially since their federal environmental assessment will not be complete until at least May. This also gives them 5-6 more months to see if oil has a slight rebound in world prices.

This is no doubt posturing with their engineering bidders and putting pressure on the federal government to give them tax concessions like they give to the manufacturing sector in Ontario. No doubt BC will be pressuring Ottawa as well to help get these projects done.

What we are seeing now is a more meek Conservative Party as they enter into an election year. They are in a TIGHT race with the Federal Liberals and the Conservatives need to tread carefully. That being said, Harper risks losing major Conservative support in Alberta & British Columbia if his government leaves this industry out in the cold and does nothing to help build it. The Petronas project is the biggest industrial project in Canadian history so far at 36 Billion, the Conservatives would be fools to let this one go and would literally be slapping the faces of their biggest supporters.


#3

Agreed. I think it is likely that one of the many LNG projects will go ahead. However, I will believe it when construction starts.


#4

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.”


#5

The real reason is they are cheap?


#6

What a ridiculous comment. If you go to buy a car and you haggle with the dealer, does that make you cheap? No one wants to pay more than they need to pay.


#7

bloomberg.com/news/2014-12-0 … delay.html

Bloomberg reporting some positive quotes from the CEO of Pacific NorthWest LNG

*Petronas and its partners are moving “aggressively” on a decision next year for Pacific NorthWest LNG, which requires four years of construction, Culbert said.

To prove it has the supplies to back the LNG exports, Petronas plans to maintain its pace of drilling, he said. The company is on track to spend C$2.5 billion in gas field development in northeastern British Columbia this year.

Costs have risen in part because the pipeline was originally proposed to extend 750 kilometers (466 miles) and now is planned as a 900-kilometer conduit, he said.

“We’ve got to continue to work to trim that as much as possible,” Culbert said of the costs. “We’ve got over 60 percent of our LNG committed so we’re a project that’s come a long ways and we’re in a good position.”*


#8

mobile.bloomberg.com/news/2014-1 … elays.html

“China and Russia signed an initial gas accord two days ago, after a $400 billion deal earlier this year. The tie-up means that only one-in-20 proposed LNG projects targeting the 2020 market will be needed, while one-in-five seeking 2025 sales will be required, according to a Macquarie Group Ltd. report.”


#9

[quote=“MadMax”]http://mobile.bloomberg.com/news/2014-11-11/russia-china-natural-gas-ties-seen-leading-to-lng-project-delays.html

“China and Russia signed an initial gas accord two days ago, after a $400 billion deal earlier this year. The tie-up means that only one-in-20 proposed LNG projects targeting the 2020 market will be needed, while one-in-five seeking 2025 sales will be required, according to a Macquarie Group Ltd. report.”[/quote]

I’m not a commodities analyst, but the Chinese will have escape clauses in any deal they make. They will walk across the street to save two cents and Russia is in no position to do anything about it. Just my thoughts.


#10

Amerika and Canada are pushing Russia to be bed fellows with china… Might back fire on Amerika and Canada.


#11

[quote=“MadMax”]http://mobile.bloomberg.com/news/2014-11-11/russia-china-natural-gas-ties-seen-leading-to-lng-project-delays.html

“China and Russia signed an initial gas accord two days ago, after a $400 billion deal earlier this year. The tie-up means that only one-in-20 proposed LNG projects targeting the 2020 market will be needed, while one-in-five seeking 2025 sales will be required, according to a Macquarie Group Ltd. report.”[/quote]

The Asian buyers of LNG are price-sensitive and they also need diversified supplies. Who would want to tie their economic prosperity to political and economic stability in Russia? Look at the given the recent events in Ukraine, combined with the dramatic moves in the ruble and the Russian stock exchanges.

North American LNG offers a lower price and greater stability of supply. Its more a matter of competition between the US and Canada than between North America and Russia.


#12

the only reason Russia maybe unstable is because of the sanctions the west have created. You political armchair enthusiast think its not going to go forward. funny thing when you use Google and do a search on Russia china deal the only non negative deal for Canada and the west comes from the financial post.

google.ca/search?q=russia+c … 8Qf0k4HYAg


#13

Are you saying its not Russia’s fault, and its actually the fault of the evil Western democracies? I think there are a few Ukrainians who might disagree.


#14

Russia and China, regardless of how you feel about the way their country is governed, are no more politically unstable than the U.S. Putin is stability. China communism is stable. The diff between China and Canada is not investment stability, but investment entry points. Foreign capital investment flows in to Canada much more easily than it does in to China. You can pay someone do something cheaply in China, but you can’t own how they do it.


#15

Russia as stable as the US? Really? How many revolutions and defaults has the US had over the past 100 years?

As for China, it is an oligarchy with a huge, impoverished lower class population. I would take the US with its large middle class and stable democracy any day.

There’s a reason why the US dollar is the world’s reserve currency and US Treasury bills are its de facto risk-free asset. Unless everyone else is wrong and you’re correct, of course.


#16

[quote=“investor”]

Are you saying its not Russia’s fault, and its actually the fault of the evil Western democracies? I think there are a few Ukrainians who might disagree.[/quote]

LMAO … oh and Amerika has not done such things Investor, Amerika propaganda machine rearing its ugly head once again, Amerika and its double standards hmm where to start, i guess from the start, Afghanistan war (WAR ON TERROR), Iraq war (Weapons of mass destruction), Libyan intervention, US Drone Strikes has been devastating to many communities in Pakistan, Yemen and Afghanistan. In Pakistan alone strikes killed 2,562-3,325 , of whom 474-881 were civilians, including 176 children. So Investor Does Amerika warrant severe sanctions and even trials in the International Criminal Court… SO before condemning Russia maybe we should look in the mirror!!


#17

Astro - you just sound crazy now. I said the US was more stable than Russia. Who could possibly disagree with that?

If you had invested your money in US stocks 100 years ago, you would still hold them and you would now be quite rich. If you’d done the same in Russia, you would possibly have been imprisoned, bankrupted, seen your money confiscated, or sent to a gulag in that time. Russia is a wonderful country, but it is NOT stable. Thats why all the Asian buyers of LNG will need to diversify their supplies. They don’t care what the Americans do in Afghanistan.


#18

[quote=“investor”]

Russia as stable as the US? Really? How many revolutions and defaults has the US had over the past 100 years?

As for China, it is an oligarchy with a huge, impoverished lower class population. I would take the US with its large middle class and stable democracy any day.

There’s a reason why the US dollar is the world’s reserve currency and US Treasury bills are its de facto risk-free asset. Unless everyone else is wrong and you’re correct, of course.[/quote]

oh dude you might need to look again Amerika does not have a large middle class. LMAO its been dwindling since the 80’s My god man where have you been for the last 15 years? in 1962 over 60 percent of Americans owned their own homes, in 2002 it was nearly 70 percent, and has dropped, according to the U.S. Census, to 65 percent in 2013, the lowest in almost two decade… One thing that hasn’t changed in 25 years is the income of the median U.S. household is still just under $52,000.


#19

[quote=“investor”]Astro - you just sound crazy now. I said the US was more stable than Russia. Who could possibly disagree with that?

If you had invested your money in US stocks 100 years ago, you would still hold them and you would now be quite rich. If you’d done the same in Russia, you would possibly have been imprisoned, bankrupted, seen your money confiscated, or sent to a gulag in that time. Russia is a wonderful country, but it is NOT stable. Thats why all the Asian buyers of LNG will need to diversify their supplies. They don’t care what the Americans do in Afghanistan.[/quote]

dude you brought up the Ukraine !!!..


#20

[quote=“investor”]Astro - you just sound crazy now. I said the US was more stable than Russia. Who could possibly disagree with that?

If you had invested your money in US stocks 100 years ago, you would still hold them and you would now be quite rich. If you’d done the same in Russia, you would possibly have been imprisoned, bankrupted, seen your money confiscated, or sent to a gulag in that time. Russia is a wonderful country, but it is NOT stable. Thats why all the Asian buyers of LNG will need to diversify their supplies. They don’t care what the Americans do in Afghanistan.[/quote]

100 years ago i would be living in rural Canada milking cows and not giving to craps about the stock market, just like right now. except i don’t milk cows…:smile: