Well, firstly the current short-term oil price blip (6 months - 2 years) really does not have much to do with same. Petronas proposed LNG facility would not come on stream until 2019 in any event. That is another 4+ years.
Secondly, most LNG contracts linked to the JCC are oil-indexed yet they are typically S-Curve contracts. IOW, the price of oil has a basement of roughly $45 per barrel and a ceiling of $85 per barrel in these LNG contracts in order to protect and hedge both the seller and buyer.
And these are long-term 30+ year facilities. Not dependent upon todays short-term oil price flux.
Most LNG facilities are also contracted out for 80% - 90% of their capacity. Leaves another 10% - 20% available for spot sales based upon the then prevailing market.
In any event, none of the foregoing matters much to the proposed Petronas LNG facility as both Petronas and its partners are all end-users to boot. Unlike Shell or Chevron which are not-end users.
Petronas also intends to pool some of the production for its other existing contractual obligations.
I always assumed that a firm FID was not in the cards this December. Yet I certainly suspected that they would go for a soft FID. BTW, December, 2014 has always been the timeline date for their FID since the get go a few years back.
The reason? Petronas still requires its federal CEAA environment certificate. The 365 day clock stopped back in May (day 167) and only recently restarted. Means that the CEAA certificate will not be issued until sometime in April, 2015.
Cannot proceed with hard FID until that has been received. Albeit, it has been reported that they are quite confident that they will receive same based upon media reports. And since then they have satisfied the outstanding juvenile salmon issue with respect to Flora Bank (utilizing a 1.6 km suspension bridge instead of trestle requiring no dredging that would disturb the sensitive eelgrass beds on Flora Bank).
Petronas is also now apparently completely satisfied with the BC government with regards to all aspects under their control. Even the BC preem and LNG industry minister Coleman were mentioned in their press release today confirming same.
Another major current obstacle appears that Petronas wants the bidding contractors to sharpen their pencils after relatively recently receiving their bids.
Quote:
Financial Post - “It’s both fiscal and regulatory certainties that we’re trying to run to ground here,” Pacific NorthWest LNG president Michael Culbert said in a telephone interview following the announcement.
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In obvious reference to the delayed CEAA environmental certificate and construction bids higher than expected.
But this tidbit certainly stands out:
Quote:
Financial Post - “We still want to move this forward at a very aggressive pace so we haven’t set a date forward on purpose,” Pacific NorthWest LNG president Michael Culbert said.
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And will say one thing. Petronas has been quite aggressive from the get go - ever since they purchased Progress Energy.
Right now, I would wager that Petronas will make their FID sometime in mid-April, 2015. After they have received their CEAA certificate and finalized the financial terms with their contractors.
PS. When the head of Petronas late last week was quoted as saying that 75% of the checklist had been completed toward their FID, the other 25% obviously still remained outstanding.