Malaysia invests in Canada's natural gas future
Petronas, the state-owned Malaysian energy giant, is planning to invest $35 billion in the Canadian liquefied natural gas (LNG) industry. This figure鈥攚hich includes the $5.5 billion听听辞蹿 Calgary-based Progress Energy Resources last year鈥攃overs $11 billion for an LNG export plant in British Columbia (B.C.), $5 billion for a proposed TransCanada pipeline to transport natural gas from northeastern B.C. to the coast, and natural gas extraction and processing costs expected over the life of the project.
Malaysian Prime Minister Mohd Najib made the听听Sunday听during a joint press conference with Canadian Prime Minister Stephen Harper, saying 鈥淚'm pleased to confirm that Petronas will set up a plant with all facilities including a pipeline to the plant鈥�; 鈥淚鈥檓听听that this is the largest direct foreign investment in Canada by any country.鈥� Harper听听that he views 鈥淧etronas investments very positively鈥� and that 鈥渢he Government of Canada is very excited by that possibility as are all those I鈥檝e talked to in the energy sector.鈥� (Related article:听)
B.C. currently produces 1.1 trillion cubic feet (Tcf) of natural gas annually, with over fifty percent of that coming from unconventional resources. The provincial government听听to triple that, hoping to reach an annual production capacity of 3 Tcf by 2020; key to this development is the construction of LNG export terminals that can open up key Asian gas markets. A Canadian National Energy Board听听found that the Horn River Basin, a shale deposit in northeastern British Columbia, holds unconventional natural gas reserves of 78 trillion cubic feet (just under one third of the estimated size of the Marcellus play), and was optimistic that continued exploration would reveal further reserves.听
The provincial government听听to use the revenue generated by projects like this to pay down the province鈥檚 debt and to establish a prosperity fund to bank energy-related revenue, similar to the sovereign wealth funds managed by neighbouring Alberta or energy-rich Norway. (Related article:听)
Ottawa had previously听Petronas鈥� acquisition of Progress Energy Resources in October 2012, only to听听its decision later that year. Foreign takeovers of Canadian national resources have sparked serious debate in the past,听with the $15 billion CNOOC鈥檚 acquisition of Nexen in 2012. The Nexen deal resulted in political backlash from the Conservative political base, which tends to view state-owned enterprise investment suspiciously.
Ottawa is walking a careful line, stating that it reserves the right to block future state-owned acquisitions, but that its policy of 鈥渄iscretion鈥� will judge each foreign investment 鈥渙n its merits.鈥�
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