Petronas watching Canadian LNG debate unfold

Malaysian energy company Petronas said Tuesday it may have to suspend plans to develop a Canadian liquefied natural gas project because of fiscal uncertainty.

Members of the government in British Columbia are debating tax and regulatory policies on planned West Coast LNG projects. Petronas said it was encouraged by support thus far from legislatures in the province for the company's Pacific Northwest LNG project, but expressed reservations because of the lack of a clear fiscal framework.

With falling energy prices, Petronas President Tan Sri Dato' Shamsul Azhar Abba said his company needs to hedge its bets on its project investments. Potential regulatory policies in Canada could threaten the competitiveness of the western 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 in a statement.

The Canadian economy depends largely on the United States for exports of its energy products. Canadian Prime Minister Stephen Harper, however, has pressed for more export infrastructure to tap into Asian markets for oil and natural gas.

Last year, British Columbia Premier Christy Clark offered more than $120 million in royalty credits for work in the natural gas sector.

"Fundamentally, we believe that the LNG project has the ability to monetize, add value and link British Columbia natural gas to the global market; to the benefit and prosperity of Canadians, especially to British Columbians," the Petronas director said.