Off to the races

October 23, 2014

In total 15 horses are lined up to be the LNG race in BC and Alaska. None have left the gate. The BC government announced a new taxation regime that will allow the race to begin.

Of the 14 LNG proposals, nine have been approved for exports by Canada’s National Energy Board, but none of the project sponsors have made a final investment decision to construct. Forecasting firm BENTEK, expects under a base-case forecast about 10 bcf a day of new LNG export capacity will get built in the next 10 years. That would cover maybe half of the projected increase in global LNG demand.

• By the numbers, the BC Government’s new LNG tax regime will be: - Initial LNG tax rate: 1.5 per cent while capital investment is being deducted. -Tax at the 1.5 per cent rate is creditable against the higher tax rate. -Tax rate on net income: 3.5 per cent once capital investments is deducted. -Tax rate will increase to five per cent in 2037. -Income tax credit reduces B.C. corporate income tax rate to eight per cent (from current 11 per cent).
• Petronas is the lead proponent in the Pacific Northwest LNG project. The company played hardball with the BC government demanding lower taxation rates. The company expressed satisfaction with the BC government announcement. For this project facility operations would create an estimated 330 long-term careers, plus approximately 300 new local, spinoff jobs in the community. Construction of the facility would create up to 4,500 jobs at peak activity.
• Meanwhile in Alaska, the Alaska LNG project has a 130-person team to lead the effort, settled its staff into offices in three cities and entered into deep negotiations with a multitude of companies that will do much of the muscular design and permitting work over the next 18 months.

Commentary

There will likely be a Final Investment Decision (FID) before the end of the year on one of BC’s LNG projects. Then the first horse will be off on the race.

Sources

• a)http://norj.ca/2013/05/inuvik-targeted-as-international-satellite-hotspot/



• b)http://us1.campaign-archive2.com/?u=563b1a3fad310486ca31e142b&id=b5b8069e08&e=f3b417bdc8



• c)http://bclnginfo.com/newsroom/b.c.-lng-tax-rates-lower-than-first-promised



• d)http://business.financialpost.com/2014/10/21/british-columbia-sets-new-lng-tax-at-3-5-lower-than-originally-proposed/?__lsa=d4e0-775a



• e)http://pacificnorthwestlng.com/wp-content/uploads/2013/02/PETRONAS-STATEMENT-ON-BC-LNG-INVESTMENT.pdf