Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Tuesday, August 04, 2015

Petronas's Silence on BC LNG Act Sends Disquieting Signal

As the British Columbia legislature passed its "historic" Liquefied Natural Gas Project Agreements Act on July 21 after a lively eight-day debate, the most important player for which the special summer session of Parliament was convened kept an aloof -- and worrying -- silence.

Petronas, the Malaysian state energy firm with a 62 per cent stake in a consortium proposing to build a US$36-billion LNG project near Prince Rupert, did not offer a public thank you or congratulatory statement to the B.C. government of Premier Christy Clark for its efforts and hard-earned legislative victory.

The Pacific NorthWest LNG (PNW) consortium's other shareholders, Sinopec (10 per cent), Indian Oil Corp (10 per cent), Japan Petroleum Exploration (10 per cent), China Huadian (five per cent) and PetroleumBrunei (three per cent), have been equally quiet.

It was left to PNW to issue a brief statement that the act -- followed by the July 23 ratification of 25-year agreement terms covering royalty, income tax credits and carbon emissions -- "brings us one step closer to building Canada's first world-scale LNG facility."

"The remaining condition of our final investment decision, environmental approval from the government of Canada, is being worked on diligently with First Nations, stakeholders and government representatives."

Petronas's silence is significant as B.C.'s elaborate undertaking to create, debate and pass the LNG act had been made in direct response to the company's high-profile complaints and threats to call off the project if it did not receive legal certainty and the offer of generous investment terms. Petronas did not reply to a request for comment on B.C.'s new act.

The project is hugely important for the Clark government, which has staked its credibility on building an LNG economy. Even after dropping the initial promise of a $1-trillion economy, it said the investment would still generate a substantial $8.6 billion in provincial revenue by 2030 through taxes and royalties, and at least 4,500 jobs during peak construction. The NDP opposition and the project's critics said the terms represented a sell-out of Canadian interests while a think tank said the latest employment projection is still far-fetched.

But all that hard work and debate may be in vain as the project's prospects have sharply dimmed in light of the prolonged weakness in global oil and gas prices, and the increasingly volatile state of Malaysia's domestic politics and weakening economy.

Caught up in its own conversation, B.C. forgot to check on events in Asia. The Canadian media is just about waking up to a months-old financial scandal in Malaysia that is threatening to take down Prime Minister Najib Abdul Razak, a big supporter of PNW LNG. Would the Malaysian government still support Petronas's costly venture into Canada if a new prime minister were in charge?

An eventful visit

On the back of his government's legislative triumph to give what Petronas wanted, B.C. Finance Minister Mike de Jong flew to Putrajaya on July 25 to lobby the Malaysians for approval of the project's construction. In June, PNW said its final investment decision would be subject to approval of the project agreement by the B.C. legislature and environmental approval by the federal government.

Just before take-off, de Jong issued a hopeful statement that since "the province has met its obligations, we are an important step closer to the company's final investment decision and the start of an LNG industry in B.C."

Instead, his six-day visit gave him an unexpected window into Malaysia's worst political crisis since independence in 1957, as well as fears of an economic crisis with the ringgit's plunge to a 17-year low against the U.S. dollar amid a growing capital flight out of the country. There is the additional threat of Islamic State terrorists establishing a Malaysian base to recruit military officers and Muslim boys to launch jihad in Southeast Asia.

A day after meeting de Jong on July 27, Najib fired his powerful deputy, four cabinet ministers and the country's attorney general who had all been demanding the prime minister to answer for the alleged theft of US$700 million in state funds and the unexplained US$11-billion debt of a government-owned sovereign wealth fund. The prime minister has vigorously denied the allegations.

A protracted power struggle now looms for a country that has yet to heal from the wounds of the last major clash in 1998 between a sitting prime minister and his deputy. Then, as now, the economy suffered.

With LNG probably the furthest issue on Malaysia's mind, de Jong held his own press briefing after meeting with Najib. The Malaysian news agency Bernama sensationally reported him as saying that Petronas would start work on the PNW project in September. The story was quickly re-published by news outlets and websites around the world.

"The construction will begin soon... this fall. All other prerequisites have now been dealt with," de Jong was reported as saying by Bernama, which headlined its story "BC Finance Minister Expects Petronas-led LNG Project To Kick Off In Sept."

B.C.'s finance ministry spokesman Jaime Edwardson rubbished the story, pointing out that crucial parts of the minister's quote pertaining to the project's environmental approval due sometime between September and December had been left out.

In an email reply to this writer, Edwardson said: "The minister is not announcing the start-up of construction. He is saying that he expects the environmental assessment process will conclude soon, which is the last formal government approval step before construction may begin."

Petronas and PNW have yet to reply to this writer's request for clarification of the Bernama story. Both companies have also been silent on de Jong's visit to Malaysia, where he also met Malaysian government officials and Petronas's top executives.

The state oil giant, which recently reported a first quarterly loss, is under growing financial pressure to defer or cancel capital-intensive projects amid forecasts that oil and gas prices will not recover to early 2014 highs for some years. In a blow to the economy, the company, which used to provide up to 45 per cent of the national budget, has been forced to cut back its dividend payments to the government.

Malaysians want Petronas to focus its shrunken budget on domestic projects to provide local jobs and support the struggling economy, said Ong Kian Ming, a member of the opposition DAP party.

"The larger challenge with Petronas is whether its capital investments in projects like RAPID and its overseas investments can be sustained in the context of falling oil and gas prices," he said in a phone interview from Malaysia. RAPID refers to Petronas's proposed US$16-billion investment in an oil refinery-petrochemical complex in the southern Malaysian state of Johor that is also faced with implementation delays.

Turning the tables on B.C., he said Canadian environmental and regulatory concerns could be causing Petronas to have second thoughts on PNW, which will cost the equivalent of about 10 per cent of Malaysia's GDP.

"If [Petronas] feels that the local concerns and environmental hurdles are too difficult to overcome, it could pull the plug on the project," he said.

His views echoed those of Rafizi Ramli, a former Petronas accountant turned senior member of the opposition PKR party, who said the company could defer the LNG project and focus instead on the Canadian upstream assets that came with its US$5.9-billion acquisition of Calgary-based Progress Energy in 2012.

China, India downplay Canada

Apart from the events in Malaysia, B.C.'s LNG plans are also at risk of being sidelined by China's focus on competing projects in Central Asia, Russia and Pakistan, and India's renewed interest to tap natural gas from nearby Iran, Turkmenistan and Oman. The three state energy firms from China and India, which together own a significant 25 per cent stake in PNW, appear not to rate the Canadian project highly.

Amid government and shareholder criticisms that China's Sinopec had overpaid for oil and gas investments abroad, it was reported that the company was trying to reduce, delay or even back out of contract terms to import LNG from a US$19-billion joint venture project in Australia.

As the pressure mounted, Origin Energy Limited, operator of the Australia Pacific LNG (APLNG) project with a 37.5 per cent stake, was forced to issue a statement that insisted 25 per cent shareholder Sinopec would fulfill its annual purchase of 7.6 million tonnes of LNG.

Sinopec has not apparently responded to Origin's statement and overt pressure. That may worry its Australian and U.S. partners, and possibly raise questions about its commitment to its proposed Canadian investment.

An Indian government delegation led by Minister of State for Petroleum Dharmendra Pradhan visited Canada in early July to affirm its support for IndianOil Corp's 10 per cent investment in PNW.

In Vancouver on July 6, Pradhan signed an "adherence agreement" with B.C.'s finance minister pertaining to the project. The Canadian media focused its attention on how the B.C. government might handle First Nations opposition and did not ask questions of the Indian delegation, which included a team of senior IndianOil executives led by chairman B. Ashok.

Significantly, that same week, Indian Prime Minister Narendra Modi was in five Central Asian countries and Russia to advance his country's interest in security matters and energy supply cooperation. Elected to office in May 2014 partly to improve his country's energy security, Modi met the leaders of Kyrgyzstan, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan from July 6 to 11 to boost security cooperation and discuss the construction of a US$10-billion pipeline network to deliver Central Asia's natural gas to South Asia, Pakistan and Afghanistan.

India is ready to commit to buying 38 million cubic metres per day of natural gas through the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline marked for start-up by 2020. Generally, piped natural gas costs much less than LNG, which has to be delivered by tankers to specially constructed and expensive import terminals.

In an interview with this writer in Vancouver, IndianOil chairman Ashok said Modi's trip to Central Asia and Russia was an important part of the government's plan to enhance India's search for energy and geopolitical security.

"We need to work closer with these countries as they are located near India, and they are very interested to supply oil and gas to our markets," Ashok said. With regard to Canada, he described PNW as a hedge rather than a priority project.

In Central Asia, Modi advanced his agenda beyond TAPI. He resurrected a two-decade-old plan for a subsea pipeline to import natural gas from Iran and Oman while adding an onshore link to tap the rich gas fields of Turkmenistan that might bypass TAPI. The case for an extended pipeline network to tap Iran's natural gas gained credence following Tehran's breakthrough July 14 talks with the UN Security Council and Germany over its nuclear energy program.

Modi also met Russian President Vladimir Putin in the Russian town of Ufa on July 9 and 10 to strengthen political and energy ties with state oil and gas firms from both countries pledging to undertake joint projects. The two leaders were among several representing major non-Western nations attending two summits linked to the Shanghai Cooperation Organisation and the BRICS group comprising Brazil, Russia, India, China and South Africa. The event received minimum coverage in the Western media.

IndianOil and ONGC Videsh, the upstream unit of state-owned ONGC, are in talks with Russian firms to jointly develop and exploit Russia's Arctic shelf oil and gas reserves. At the same event, Russian oil giant Rosneft announced it is buying a 49 per cent stake in India's privately owned Essar Oil.

An industry in trouble

"We are not banking on an oil price recovery overnight. It will take several years," a senior Shell executive recently told Reuters.

In the final week of July, Shell, BP, Chevron, ExxonMobil and ConocoPhillips along with a number of Canadian oil and gas companies piled on the gloom by announcing budget and job cuts to accompany the release of dismal financial and operating results for the second quarter.

The collapse of oil and gas prices since mid-2014, and the surge in supplies from advanced projects in the U.S., Middle East, Central Asia, Africa and Australia have greatly undermined the viability of almost all of B.C.'s 20 proposed LNG projects mostly for export to Asia, according to two separate studies by the London-based Carbon Tracker Initiative (CTI) and the Oxford Institute for Energy Studies (OIES).

Using different economic models and data, CTI and OIES both arrived at the same conclusion that none of the proposed major projects appear to meet the business case for production start-up over the next 10 years.

CTI's financial analyst Andrew Grant said Canada stands to lose US$82 billion worth of proposed LNG projects through 2025 as they will not be viable in a low-demand, low-price environment.

"The modelling in our report has all of Canada's potential projects as being unneeded in the next decade. Those included in the US$82 billion list are Woodfibre, LNG Canada, Kitimat, Prince Rupert and PacificNorthwest (PNW)," said Grant in an interview with this writer.

"Despite Canada's abundance of gas resources and the plethora of proposed LNG export schemes, the current business environment, characterized by low oil prices and industry consolidation, does not indicate that any Canadian LNG scheme will be commissioned before the middle of the next decade," researcher Ieda Gomes wrote in her May study for the OIES.

In view of these developments in Asia and the global oil-and-gas industry, B.C.'s efforts in creating an historic LNG act are looking more like a small step in a suddenly extended arduous foot journey with no clear destination in sight.

Original Article
Source: thetyee.ca/
Author: Ng Weng Hoong

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