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LNG importer waves warning flag; Tepco warns BC against export tax
Japan’s largest importer of LNG has delivered a sharp jolt to the British Columbia government: Drop the idea of a tax on gas exports or put its LNG dreams in danger.
Tepco, Tokyo Electric Power Co., also prodded the government to resolve the concerns raised by First Nations about the construction of pipelines from northeastern British Columbia gas fields to coastal liquefaction terminals.
A company spokeswoman said uncertainty hanging over the LNG projects, including taxation on Greenfield operations, could slow or stop plans.
Tepco also said that First Nations issues could have a “material adverse effect on pipeline construction.”
The industry has already voiced its deep opposition to any moves by the province to impose taxes and levies to raise an estimated C$30 billion over 30 years in incremental revenues. Gas reserves a positive However, Tepco sweetened the mix by suggesting British Columbia is poised to grab a large piece of global LNG markets because of its “substantial gas reserves and its good geographical position to export LNG to Asian countries.”
Perhaps overriding those concerns is the pressure from potential Asian LNG buyers to sign contracts indexed to oil prices.
Tepco has led the way by signing a contract five months ago to base its prices on the Henry Hub delivery point in the United States. It signed a preliminary deal to secure 400,000 metric tons a year of LNG from the Cameron LNG project, starting in 2017 and is in discussions to double those volumes.
The spokesman said Tepco understands that a “Greenfield project has to achieve a certain return (but) we do not agree with the argument that only the oil-indexed price can achieve that return.”
Global energy consultant Wood Mackenzie said in a new report that although Canada can rightly claim political stability as an advantage over some of its LNG rivals, that edge could be offset by high construction costs and possible court challenges from First Nations.
—GARY PARK
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