In a news release making the announcement, Petronas’ executive vice-president and chief executive officer (Upstream) Anuar Taib said: “We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision.”
It must have been a tough decision to make, especially because Petronas has already spent something like $11 billion: $10 billion to purchase a gas company, and hundreds of millions of dollars to develop an export terminal and plan for a pipeline.
“We continue to believe that an LNG industry can thrive in British Columbia with the right project at the right time,” Taib told reporters. “Our experience tells us that the development of the LNG business requires a long-term view of the market, world-class natural gas resources, competitive project cost and supportive market conditions.”
Stop and think about that for a moment.
Then think about the change in market conditions that has happened since the heady days when then-premier Kathy Dunderdale sanctioned the Muskrat Falls project.
An expected steady growth in oil prices — needed to fund construction and make the project’s electricity prices competitive — didn’t appear. In fact, oil prices actually collapsed and are expected to stay low. Increased prices for exported energy slipped, anticipated growth in demand in Labrador due to an expanding number iron ore mines didn’t appear.
The expected on-time, on-budget project — predicted with “a high degree of certainty” based on what the government called our “world-class expertise” — is far over-budget and years off schedule.
Our energy warehouse now has the ability to put us in the energy poorhouse.
Unlike Petronas, we didn’t read the changing market conditions and walk away. We literally doubled down, continuing to spend as project costs rose — while at the same time essentially giving our Nova Scotian partners the comfort of a fixed price for electricity. The sad part is we literally could have done without Muskrat Falls completely by building the power line across the province and using the Upper Churchill recall power we now sell for pennies, at least until 2041 when the Churchill Falls deal that used to be the worst in our history expired.
Meanwhile, there’s the nagging message from Petronas: its massive energy project, shut down because market conditions changed drastically and no longer supported going ahead. Imagine that.
Sometimes, you have to stop and remember the words of noted world-class economist and country singer Kenny Rogers: “You’ve got to know when to hold them. Know when to fold them. Know when to walk away. Know when to run.”