Progress, Petronas say government approval of takeover was vital to expansion

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CALGARY - Progress Energy Resources Corp. and the Malaysian state-owned company which has been approved to acquire it say Ottawa's greenlighting of their deal is vital to the expansion of their Liquid Natural Gas plans.

The two companies released a joint statement Sunday night welcoming the Conservative government's decision, which was announced on Friday along with the approval of Chinese state-owned CNOOC's bid for Calgary-based Nexen Inc.

In the Petronas-Progress case, both companies had indicated that the size of a project on the British Columbia coast rested on whether Ottawa approved the $6 billion dollar takeover.

The two companies had already begun early design work on the Pacific Northwest LNG project, which would ship liquefied natural gas from the West Coast for export to other countries.

A feasibility study was completed into a LNG facility on Lelu Island near Prince Rupert, B.C., and work has begun to determine timelines, costs and labour requirements.

On Sunday the companies said they plan to proceed with the construction of the Lelu Island export facility, continue developing natural gas production in the Montney region of northeast B.C. and northwest Alberta, and will eventually install a natural gas transmission pipeline which would run from the production fields to the export facility.

"These components will create thousands of well-paid jobs during construction of the facility and pipeline, as well as permanent, ongoing operating jobs throughout our LNG business, from the Montney region to the West Coast," Petronas CEO Tan Sri Dato' Shamsul Azhar Abbas said in a statement.

The companies also said the Pacific Northwest LNG project will be opening an office in Vancouver early next year and will be expanding its project team.

"This approval by the Canadian government marks a vital step in our plans to develop a LNG export business and opens promising new business opportunities for Progress, British Columbia and Canadian trade expansion," Progress CEO Michael Culbert said in a statement.

The two companies said Petronas' customer network and experience in the energy sector combined with Progress' (TSX:PRQ) expertise in resource development would help establish Western Canada as a "major long term global LNG player."

Before the government approval of the takeover was announced, the Pacific Northwest project was to include two plants to chill natural gas from northeastern B.C. into a liquid state, each processing 3.8 million tonnes per year.

It was expected that if federal approval for the acquisition was won, throughput at the facility was expected to increase by about 60 per cent.

The estimated investment in the B.C. LNG export facility is expected to be between $9 billion and $11 billion, the companies said Sunday.

The construction phase would result in up to 3,500 direct jobs and the long-term operations of the facility would result in 200 to 300 direct jobs, they added.

The LNG plant is part of a partnership the two companies announced in mid-2011 to jointly develop Progress' natural gas lands in northeastern B.C. The two firms agreed on a takeover about a year later.

Petronas' acquisition of Progress is scheduled to be completed on Dec. 12.