• Mon
  • Sep 1, 2014
  • Updated: 5:05pm
BusinessCommodities
ENERGY

British Columbia woos LNG investment with low taxes

PUBLISHED : Saturday, 10 May, 2014, 1:20am
UPDATED : Saturday, 10 May, 2014, 4:14am

The head of Canada's British Columbia province vowed to offer a more competitive tax regime than Australia to attract investment to build liquefied natural gas (LNG) exports in projects targeting rising demand from the mainland.

Christy Clark, the premier of Canada's westernmost province, said her government is also working with trade unions and educators to provide training for local people to manage wage inflation should a construction boom be realised in multibillion-US-dollar gas projects.

"We will be very competitive, we will certainly be more competitive than Australia," she said yesterday in response to a question about the province's LNG tax regime, as she concluded a week-long mission in Asia to encourage more investment in her province.

Sharp wage increases resulting from Australia's resources boom saw some firms give up building onshore LNG facilities or switch to cheaper offshore facilities.

British Columbia, a latecomer in the LNG export industry which has attracted 14 export project proposals, is also competing with the United States where 30 projects have been proposed. They will also compete with Russia and Central Asia that have proposed to export gas to the mainland.

Clark said a tax rate has been settled with proponents of facilities to chill, compress and liquefy gas in British Columbia, which is then shipped by specially-built tankers across the Pacific to Asia.

Project proponents - including mainland state-backed oil and gas giants - have invested more than US$8 billion on upstream gas exploration and production in interior regions of the province, including construction of pipelines to send the gas to proposed processing facilities.

 

In February, the province said in its budget that LNG export plants will be subject to an initial tax rate of 1.5 per cent on profits. It rises to as high as 7 per cent later after the plants fully recover their construction costs.

Clark said a tax rate has been settled with project proponents, but she declined to divulge the details saying she is bound by non-disclosure agreements.

"The LNG tax is just one part of the whole economics of this ... there [are also] royalties, corporate income tax, environmental compliance costs," she said. "We are working out the total burden of government costs."

The final tax rate will be legislated in autumn and Clark's government aims to complete signing project development agreements by the end of November. "It's urgent that we get these details wrapped up," she said.

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