If Malaysia's Petronas completes its proposed takeover of Canadian natural gas producer Progress Energy Resources, the companies will try to quicken their final investment decision on British Columbia LNG exports to Asia by late 2017 or early 2018, executives said Thursday.
Progress CEO Mike Culbert said depending on shareholder approval and a positive ruling from Canadian government foreign investment regulators, the C$5.5 billion ($5.32 billion) deal is projected for closure by September 25. The deal was announced earlier Thursday (See story, 1123 GMT).
The companies hope to complete a feasibility study started a year ago by end-August, setting the stage for a final investment decision on an LNG facility in the latter part of 2014.
"We will work to shorten that time frame, through engineering work and site selection, so that we can get the natural gas to market as quickly as possible," Culbert said.
The companies Thursday disclosed they had signed a feasibility assessment agreement with the Prince Rupert Port Authority, gaining exclusive rights to conduct further studies for a terminal on Lelu Island off northern BC.
"We would like very much to speed things up to start exporting towards the end of 2017 or early 2018," said Datuk Anuar Ahmad, Petronas' executive vice president of gas and power.
The LNG project will look for long-term customer contracts of 15 to 20 years and Petronas will eye markets in Asia, Ahmad said, listing Japan, Korea and Taiwan as candidates. Petronas would continue the Asian practice of indexing LNG prices to oil, he said.
Culbert said the majority of the gas reserves under the C$1.07 billion joint-venture established a year ago with Petronas to develop shale gas in the North Montney region need prices of C$3.00/Mcf at the AECO hub for a 10% rate of return.
The North Montney is a "very prolific play," Culbert said, noting that Petronas estimated the contingent resources at 15 Tcf a year ago, of which 20% is assigned to the JV.
Culbert said in a statement that the Progress "asset base requires extensive capital to develop its large potential and ultimately access international LNG markets. "Petronas offers the size and scale that will enable our company to continue to grow and not be limited by the same cash flow challenges faced by many producers in the North American natural gas market today," he said.
Ahmad was not concerned about the ability of Petronas to compete for materials and labor against three other LNG projects in BC, he said.
"There are many ways of technically handling" the requirements, including fabricating components "somewhere [other than Canada] if necessary," he said.
The companies have not yet settled on the scope of an LNG project or the capital cost, but said the general price range is about $1,500/mt, Ahmad said.
