Petronas to slash up to $11 billion over four years

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FORT ST. JOHN, B.C. — According to a new Wall Street Journal story, Petronas – the Malaysian state oil firm and majority owner of the proposed multibillion-dollar Pacific Northwest LNG project — is planning to slash as much as $11.4 billion in capital and operating expenditure over the next four years.

The Journal cites as its source an internal memo sent to Petronas staff by the companies’ chief financial officer.

The plan is reportedly tied to the recent dramatic drop in the price of crude oil, now below $30 a barrel U.S.

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The story says the slide could spell a further drop in Petronas revenue and earnings as some domestic and international projects may become unprofitable.

Covering as much as one third of the annual budget, Petronas is the Malaysian government’s biggest source of revenue, and the current budget was based on the price of Brent crude at $48 a barrel U.S..

The Pacific Northwest LNG facility would be built on land in the District of Port Edward owned by the Prince Rupert Port Authority and has long been considered one of the star candidates to lead the development of a BC LNG industry.

It would receive natural gas from the North Montney by way of the Prince Rupert Gas Transmission Project to be built, owned and operated by TransCanada.

The project received an Environment Certificate from the provincial government in November of 2014, and Pacific Northwest announced a positive Final Investment Decision in June of last year subject to two conditions.

One of them was satisfied a month later, when the provincial government steered the Project Development Agreement legislation through the legislature.

However, the second condition still requires a positive regulatory decision on the project’s environmental assessment by the new federal government, before the consortium partners confirm the Final Investment Decision.

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Added to this mix now is the aforementioned memo, and Petronas, which didn’t specify which of its projects would be affected, has indicated it could be March before we get more details.

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