Pacific Northwest LNG just needed a “re-think”

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In retrospect, it will be seen as a good decision. Petronas is pulling out of the US$29 billion Pacific Northwest LNG project in British Columbia, Canada. The Malaysian state oil company cited ‘prolonged depressed prices and shifts in the energy industry’ as the reasons for exiting the long-gestating project. The former refers to the current slump in LNG prices, which shows no sign of improving, and the latter refers to America’s LNG renaissance, founded not on mammoth expensive projects but nimble, dynamic plays. The decision to admit defeat has not been an easy one, but it is the right one.

The initially announced cancellation of Pacific Northwest LNG in the press, is the fifth major LNG export casualty in the last 18 months, joining Fisherman’s Landing and Browse in Australia, Oregon LNG in the USA, and Prince Rupert, also in British Columbia, to be shelved. The projects that would have joined Wheatstone, Gorgon, Ichthys and Prelude are now victims of the painful rebalancing the LNG industry has to undergo, as suppliers yield power to buyers, who for the first time in LNG history have a luxury of choice and are exerting their rights.

It might have been different, but Pacific Northwest also came under much pressure of local politics. Located in an environmentally sensitive area of British Columbia, environmentalists have railed against the project from the start, even as the Canadian federal government and the BC state government gave their approvals after extensive environment impact studies. Then in May, the ruling NDP lost their majority in BC state elections, forcing them to form a support coalition with the Green Party, vehemently opposed to the project. When that happened, the writing was always on the wall for PNW…

 

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