(EnergyAsia, October 10 2014, Friday) — Faced with the possibility of having to cancel its proposed C$9-to-C$11 billion liquefied natural gas plant in Canada, Malaysia’s state energy firm Petronas said it is “encouraged” by high-level talks with British Columbia provincial government leaders.

This week, the company’s President and CEO Shamsul Azhar Abbas held several meetings with BC Premier Christy Clark and Minister of Natural Gas Development Rich Coleman in Vancouver over the fate of the proposed Pacific NorthWest LNG (PNW LNG) project near Prince Rupert in northwestern BC. Having earlier announced that it planned to make its final investment decision (FID) by year-end, Petronas recently threatened to cancel the project, blaming Canada for not providing sufficiently attractive tax and regulatory breaks.

Later, it said the project could be delayed for up to 15 years that would effectively amount to a cancellation.

The company re-affirmed this position in a statement issued on Wednesday despite the more conciliatory comment that it and the BC government had “agreed on clear milestones, action plans and deliverables for both parties to support project competitiveness necessary to undertake a FID by mid-December.”

Petronas said it would also continue to work with Ottawa and its agencies to advance the regulatory process and clarify the fiscal framework for the new industry.

“Fundamentally, we believe that the PNW LNG project has the ability to monetise, add value and link BC natural gas to the global market; to the benefit and prosperity of Canadians, especially to British Columbians,” said Mr Shamsul.

“Nonetheless, the reality of the global LNG market is that we are facing potential overhang and decreasing demand that creates downward pressure on LNG prices. In this market environment, the ability to secure market and customers is paramount.”

He said softening crude prices are putting greater pressure on international energy companies like Petronas to reassess its investments.

“The proposed fiscal package and regulatory pace in Canada threatens the global competitiveness of the PNW LNG project. This is further exacerbated by preliminary project costs, which indicates cost of local contractors to be higher and not benchmarked to global contractor’s cost,” he said.

The company is targeting BC’s “additional tax and high cost environment” for hurting the project’s viability and competitiveness.

In its last portfolio review, Petronas said the project’s economics appeared marginal.

“Without material cost reduction efforts cross the project the company will have a tough time reaching a positive FID by mid-December,” it said, adding that it needs to secure consensus on “key principles” for the project’s success by the end of October.

If this deadline is missed, Petronas warned that it would have to defer its investments until the next LNG marketing window by between 10 and 15 years.

“In light of this, the next few weeks will be critical in ensuring that commitments made during the last meeting will be followed through by creating a tangible environment which stimulates competitiveness and investor’s confidence in BC,” it said.