Japan’s Japex will sell its 10% stake in a Canadian shale gas project to Malaysia’s Petronas amid concerns over profitability and its carbon footprint.
Japex is divesting its share of a joint venture that is responsible for shale development and production in the North Montney region of British Columbia.
The shale gas project would have provided gas for the Petronas-led Pacific North West LNG project, which was cancelled in 2017 due to the challenging business environment and low prices.
Japex said it has been working with joint venture partners, that included China’s Sinopec, Indian Oil and Petroleum Brunei, to maximise the value of North Montney since 2017. However, the Japanese company, which is accelerating decarbonization efforts, said it anticipates a more severe environment for the exploration and production business. This prompted its divestment decision.
Japex added that the global pandemic has structurally changed markets and that global decarbonization efforts are accelerating.
“As a result of this transaction, Japex expects to record an extraordinary loss of approximately C$493 million (about ¥39.4 billion) in the consolidated financial results for the second quarter of the fiscal year ending March 31, 2022 (FY22),” it said, adding that the impact has already been reflected in its forecast of consolidated business performance for FY22.
The deal is expected to be completed by the end of June.
Other companies involved in the Canadian shale gas project include Petronas Group (62%), Sinopec Group (15%), Indian Oil Group (10%) and Petroleum Brunei Group (3%).
In a separate statement Japex said that it is committing to net-zero scope 1 and 2 emissions by 2050. It will also be strengthening the line of business that contributes to the reduction of supply chain emissions.
Japex said it wants to turn carbon neutral into a profitable business based on CO2 injection and storage technology. It will expand participation in renewable energy projects and work for a stable supply of oil and gas.