MOSCOW (MRC) -- British Columbia’s proposed tax on natural gas exports provides long-awaited financial clarity to energy companies deciding whether to spend as much as USD240 billion to start shipping the fuel from Canada’s Pacific Coast, said Hydrocarbonprocessing.
Profits from liquefied natural gas, or LNG, projects will be taxed at an initial rate of 1.5%, Michael de Jong, finance minister for the nation’s westernmost province, said as the government released its budget for the fiscal year beginning in April. The rate will rise to as much as 7% after companies recover the costs of building the shipping terminals.
The province plans to erase its debt with revenues from the LNG sector, which may add CD1 trillion (USD913 billion) to its economy by 2046. ExxonMobil, Chevron and Royal Dutch Shell are among companies seeking to liquefy low-cost Canadian gas so it can be shipped to Asian markets that pay as much as five times more than North America.
The province said its tax and royalty rates will be lower than in Australia and five US states, where competing projects are being built.
The government plans to seek approval of the rates from the legislature before the end of the year. Additional regulations related to gas exports are expected in 2015. The tax won’t be collected until plants are running, after 2017, de Jong said.
More than a dozen LNG projects have been proposed in British Columbia as producers seek to capitalize on Canadian fields including the Montney Shale, estimated to contain 449 trillion cubic feet of gas. No companies have yet made a final decision to proceed.
British Columbia plans to collect CD1.23 billion from its carbon tax in the fiscal year starting in April and C$441 million from gas royalties, according to budget documents. The province taxes carbon emitted within its boundaries at a level of CD30 a metric ton.
As MRC wrote before, Malaysia's state oil and gas company Petronas plans to invest USD20 billion in its liquefied natural gas project in West Canada, one of the biggest investments aimed at capitalizing on cheap North American gas. The company is planning two LNG trains of 6 million tpy each under the Pacific NorthWest LNG project by the end of 2019.
MRC