VANCOUVER (NEWS1130) – Petronas’ move to put its LNG project near Prince Rupert on hold could encourage other companies to take a similar route, according to one expert.
Many long-term LNG contracts are actually indexed to the price of oil, and as those prices have dropped, it affects the viability and attractiveness of investing in LNG, says Werner Antweiler with UBC’s Sauder School of Business.
“Market conditions are less certain today than even a year ago,” he tells us. “It’s a normal reaction for business to sit and wait to see if the market conditions are right before they invest billions of dollars into developing these projects.”
So he says Petronas’ decision to hit pause could cause other companies to think twice about going ahead with their plans to extract BC LNG.
“The announced delay will of course be a signal to some of these other projects to have a very close look at the economics and to see if the project still makes economic sense at this point or whether or not they should delay their investment as well,” says Antweiler.
He adds while current prices are low, he feels the market will eventually rebound but in the short term uncertainty could scare some companies away.