The $27 billion Pacific Northwest LNG project in British Columbia is dead, the victim of “changes in market conditions,” according to parent company Petronas.

The provincial LNG association is putting a brave face on the unexpected decision, vowing to work with the new B.C. NDP government to advance the industry, but one energy economist says that if this project failed, the chances are slim that others will succeed.

“With this news, we are reviewing our options related to our proposed Prince Rupert Gas Transmission project as we continue to focus on our significant investments in new and existing natural gas infrastructure to meet our customers' needs,” Said TransCanada’s president Karl Johannson in a statement issued in the wake of the Petronas news.

When Petronas started the 19 mtpa Pacific Northwest LNG project in 2013, LNG prices were peaking around US$20/MMbtu, but since then have slid to around $5. The sector has become flooded with new supply, led by the U.S., which has moved quickly to convert gasification facilities to liquefaction plants for export, as well as build—much more rapidly than expected—operations like Cheniere Energy’s Sabine Pass.

“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,” said Anuar Taib, Petronas’ CEO for upstream, in a statement.

By comparison, Canada’s regulatory process moved much more slowly, taking until the fall of 2016 to greenlight Pacific Northwest with 190 conditions after a review found it would have significant environmental impacts. The project was opposed by many indigenous communities on the northern coast, some of which filed lawsuits to stop construction.

“Once a project is approved, it is then up to the proponent to decide how to proceed. Today's announcement concerning the Pacific Northwest LNG project was a business decision made by the proponent,” said Natural Resources Canada spokesperson Alexandre Deslongchamps in a statement, the Canadian department that oversees energy regulation.

Three years ago, energy economist Michal C. Moore wrote a study on the economics of Pacific Northwest LNG, which he thought were pretty good because Petronas was “book ending.”

“They produce it, they compress it and put it on a ship and they sell it to themselves. So they had the best of all worlds because they get the LNG as close to the marginal cost of production as possible, and take advantage of that,” he said in an interview. “So I have to say that this thing is turning south because Petronas is projecting depressed gas prices and a lot of competition well out into the future.”

Marvin Shaffer is an adjunct professor at the School of Public Policy, Simon Fraser University, and he was not surprised by Petronas’ decision: “A recent National Energy Board report confirmed what many had been saying for some time—market conditions plus growth of supply from existing sources greatly limited the opportunity for large new LNG plants in British Columbia. It would have been far more surprising had they said they were going forward at this time.”

British Columbia has abundant supplies of natural gas in the northeastern part of the province, but is faced with declining markets in the United States, where cheap shale gas is threatening to push Canadian gas out of the Midwest.

“We remain committed to developing our significant natural gas assets in Canada and will continue to explore all options as part of our long-term investment strategy moving forward,” Taib said.

The company’s majority-owned subsidiary, Progress Energy Canada Ltd., holds the largest natural gas reserves in the country, with over 28 Tcf of proved plus probable unconventional reserves.

B.C. still has hope for smaller projects, Shaffer said, pointing to the site problems Pacific Northwest encountered when it promised a First National community $1 billion to allow the plant and terminal to be built on Lelu Island, part of Lax Kw'alaams Band territory and the offer was rejected.

“It will be challenging for any new LNG plant to be developed. However, smaller projects like Woodfibre [a $1.6 billion LNG project just north of Vancouver] may have a better chance of proceeding because of the markedly smaller scale of investment involved.”

The B.C. LNG Alliance said in a statement it plans to work closely with government because we “have a window of opportunity to develop B.C.’s LNG industry, but the next several years will be critical.”

Moore is not so sure there is a window. “I figured [in my study] that Petronas could basically price the LNG at whatever they wanted and go ahead. This decision says that there's a serious gap in the market and the market fundamentals going forward.”

He believes that Canada should have jumped on the LNG market opportunity like the Americans instead of assuming the window would remain open.

“You have to anticipate what that market is going to be, get your ducks in order, and then it’s all about long-term 20- to 25-year contracts,” he said. “I think Petronas is simply acknowledging that they didn't get started soon enough with this, or the approval process, and the conditions are simply going to take too long for them to be able to catch up.”

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