New Canadian LNG Project on the Horizon

Petronas has reached a deal with British Columbia related to its proposed liquefied natural gas export terminal in Canada, putting the Malaysian energy company a step closer to a final investment decision, the province said on Wednesday.

The project development agreement (PDA), which must still be ratified by both the company and the province, provides assurances on issues like infrastructure and aboriginal consultation, along with measures to ensure the project will not face onerous tax or fee increases through the contract term.

A separate royalty agreement, also announced on Wednesday, sets out minimum output targets and the long-term royalty rate for the company's natural gas production in the province's northeast.

"These agreements set the stage for a new era of economic activity and a new industry for British Columbia," Premier Christy Clark told reporters, adding that the province is continuing to build partnerships with aboriginal communities.

At roughly $36 billion, the total investment by Petronas and its partners includes the construction of the Pacific NorthWest LNG export terminal near the northern city of Prince Rupert, a natural gas pipeline and ongoing gas development.

The government deal comes a week after an aboriginal group rejected an offer of C$1 billion ($820.9 million) in return for supporting the export terminal, saying the development would harm a fish habitat next to the project site.

The company, which has made major changes to project design to address aboriginal concerns, said it is not considering alternative locations for the terminal.

A federal environmental review of the Petronas-led project is underway, with a regulatory decision expected later this fall. It is one of the most advanced of 19 LNG export plants proposed for the Pacific Coast province.

Michael Culbert, president of Petronas' Canadian subsidiary, told reporters the company is working with its partners to clear all internal hurdles so they are ready to move as soon as the PDA is ratified and the environmental certificate is in hand.

"What we're trying to do is look at all the aspects of the final investment decision and get to the point where a commercial investment decision can be made," he said. "Then we can move on once the conditions are met."

The company had previously said it hoped to make a final investment decision by the end of June.

Petronas, officially known as Petroliam Nasional Bhd, has partnered with Sinopec, JAPEX, Indian Oil Corporation and PetroleumBRUNEI on the export project.