(EnergyAsia, May 2 2013, Thursday) — Malaysian state energy firm Petronas said the first customer for its proposed liquefied natural gas (LNG) project in Canada’s British Columbia province has agreed to purchase 10% of its output for 20 years.

Petronas and its Calgary, Alberta-based subsidiary, Progress Energy Canada Ltd, expect their jointly owned Pacific NorthWest LNG Ltd plant near Prince Rupert port to begin supplying Japex Montney Ltd, the Canadian subsidiary of Japan Petroleum Exploration Co Ltd (Japex), from 2018.

Japex had earlier agreed to acquire a 10% stake in Progress Energy’s natural gas assets and the proposed LNG terminal located along the west coast of Canada. As part of the transaction, Japex had agreed to also buy 10% of the plant’s LNG production for a minimum of 20 years for export to meet Japan’s domestic consumption.

With the first sales of both production and equity in the project, Petronas could look to hive off another 40%, leaving it with about half the proposed $15 billion development. This strategy reduces Petronas’ risks in developing a greenfield project that has no precedent in Canada while locking in buyers to ensure long-term sales of the natural gas.

Michael Culbert, President and CEO of Progress Energy Canada, said:

“This JAPEX investment in upstream natural gas resources in British Columbia and the downstream LNG facility further solidifies North Montney as a world-class natural gas asset, and it clearly defines British Columbia and Canada as attractive and competitive destinations for global investment.

“It also affirms the confidence in Petronas as a world class developer of LNG projects. Progress has increased its development pace in northeastern British Columbia in 2013, building new capacity to supply Pacific NorthWest LNG with abundant Canadian natural gas for export beginning in late 2018. The LNG sale to Japex is the first of several LNG sale transactions that are being negotiated with LNG buyers in Asia.”

Vancouver-based Pacific NorthWest LNG is planning to build a world-scale LNG export facility on Lelu Island near Prince Rupert, initially comprising two LNG trains of six million tonnes/year capacity each to be followed by a third train of six million tonnes.

Bank of America Merrill Lynch acted as financial advisor and Norton Rose Calgary acted as legal advisor to Petronas in connection with the transaction.

Acquired by Petronas last year, Progress Energy Canada is developing its vast natural gas resources and infrastructure for export as LNG to Asia’s energy-hungry markets.