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SHEL Shell Plc

2,560.50
12.00 (0.47%)
18 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Shell Plc LSE:SHEL London Ordinary Share GB00BP6MXD84 ORD EUR0.07
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  12.00 0.47% 2,560.50 2,561.50 2,562.00 2,573.50 2,549.50 2,557.50 9,577,860 16:35:26
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Crude Petroleum & Natural Gs 316.62B 19.36B 2.9804 8.59 166.39B

British Columbia Proposes Tax Break to Induce Natural Gas Development -- Update

22/10/2014 1:53am

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By Chester Dawson 

The Canadian province of British Columbia on Tuesday introduced legislation to lighten the tax burden for natural-gas export terminals, a move aimed at spurring development of multibillion-dollar liquefied natural gas plants on the country's Pacific coast.

The tax treatment for LNG terminals, which would target Asian markets, has become a key issue for energy companies like Malaysia's Petronas who have said uncertainty about taxation levels in Canada threatens to delay or defer plans to build plants to liquefy and ship natural gas from British Columbia.

British Columbia Finance Minister Mike de Jong said the government expects the legislation to be passed in this legislative session, which is scheduled to conclude in November. Premier Christy Clark's British Columbia Liberal Party has a majority of seats in the provincial legislature, which effectively guarantees passage.

The long-awaited policy calls for a two-tier tax on exports of LNG--natural gas that has been cooled to liquid form, shrinking its volume and making it easier to transport. It cuts the maximum income tax to 3.5%, down from 7%, and caps it at 1.5% until the capital investment needed to build the LNG plants is paid off.

The Wall Street Journal reported on Monday that the province would lower its LNG income-tax rates to jump start hopes of becoming a global export hub.

British Columbia's government has sought to strike a balance between its desire to lure LNG investment with its need for additional tax revenues. Premier Clark has championed LNG as a source of job and revenue growth, calling for a C$100 billion "prosperity fund" funded by direct and indirect taxes.

Malaysia's state-run oil and gas company, which is considered the front-runner among 18 rival proposals for LNG plants in British Columbia, has openly pressured the provincial government to finalize its taxation policy and incentivize industry to start construction on the as yet unbuilt terminals.

In February, the government of British Columbia unveiled a provisional policy for a 7% income tax after the capital investment is paid off. But that was received poorly by the industry, which hinted that rate would jeopardize operators ability to make a sufficient return on LNG projects.

The new policy, which will be implemented from 2017, will raise the income-tax rate on LNG to 5% in 2037 from an initial 3.5%.

Mr. de Jong said the province hopes the federal government will provide additional incentives to help establish the industry in Canada. "To the extent the federal government can assist in creating an environment that encourages this multibillion dollar investment, I believe that is worthwhile and I believe the federal government recognizes it as being worthwhile," he said in an interview.

The head of a lobbying group representing the biggest industry proponents, including Petronas, Chevron Corp., Royal Dutch Shell PLC and Cnooc Ltd., echoed those comments, saying the tax policy was a necessary but not sufficient move toward creating a viable environment for Canadian LNG terminals.

"We do now have clarity and some certainty around the LNG tax, but the question is how will that fit into the overall cost picture?," said David Keane, president of BC LNG Alliance. Mr. Keane said Canadian projects are competing for capital with LNG plants in the U.S., Australia, East Africa and Russia.

Earlier this month, Petroliam Nasional Bhd., or Petronas, Chief Executive Shamsul Azhar Abbas raised the specter of deferring a decision "for 10-15 years" on his company's proposed 36 billion Canadian dollar (US$32 billion) LNG plant unless a clearer-and globally competitive-tax policy came out by month's end.

A spokesman for the Petronas-led project, which is known as Pacific Northwest LNG, said that the company was reviewing the proposed provincial tax policy, but signaled that it needed greater clarity from the federal government as well. "It is imperative that all levels of government recognize the need to remain competitive with other jurisdictions around the world that currently, or plan to, export LNG," spokesman Spencer Sproule said in a statement.

Petronas has said it wants to make a final investment decision by year-end. But some industry observers said LNG project backers are unlikely to move ahead with construction amid lingering uncertainty about incentives from the federal government, such as accelerated depreciation on capital investments.

"Not having that federal clarity is going to push FID into next spring for all the major projects," said Chris Theal, president of Calgary-based Kootenay Capital Management.

Paul Vieira contributed to this article

Write to Chester Dawson at chester.dawson@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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