Canada LNG Plant Delayed if no Tax Deal

Malaysian state-owned oil and gas company Petronas said on Monday it could delay its planned $11 billion liquefied natural gas plant on Canada's Pacific Coast by as long as 15 years unless it can reach a favorable tax deal by month's end.

Petronas said in a statement that the economics of the plant are marginal and without a favorable tax arrangement with the province of British Columbia and Canada's federal government to lower costs, it could shelve the project for a decade or more.

"Petronas needs to secure consensus on key principles vital to the success of this project by the end of October," the company said in a statement. "Missing this date will have the impact of having to defer our investments until the next LNG marketing window, anticipated in 10-15 years."

British Columbia is drafting a tax regime for its nascent LNG-export industry and is now negotiating the details of its plan with the companies looking to supply the Asian market. Christy Clark, the province's premier, said last week she was "very confident" that Petronas would agree to go ahead with the planned facility and expects tax legislation will be unveiled in the provincial legislature later this month.

However, Petronas said the proposed fiscal package and slow regulatory pace in Canada threatens the future of its Pacific NorthWest LNG plant, especially since construction costs in northern British Columbia are already high.

It said it wants to make a final decision on whether to go ahead with the project by mid-December.

Reporting by Scott Haggett