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When is enough?

Re: Oil and gas industry seeks billion-dollar tax break to lure LNG plants

The reality for the companies producing shale gas in northeast BC is that they have no market. North America is awash in the stuff, prices are stuck on low, and producers on every coast of the continent are looking to get it offshore. Without LNG opening a tap to Asia, BC's companies are simply loaded up with debt, share prices collapsing almost as fast as revenues, and no future. Cheniere has set a new standard for North American pricing of LNG and it ain't oil-linked in Asia anymore. That means: no pot of gold, and even if they do get the LNG facilities built, they won't be looking at 3, 4, or 5 time price factors by the time they have signed up enough customers to fill the first tanker.

So here's the picture: investors know this, and LNG buyers know this.
They're counting on politicians being too desperate and dumb to know this, and the politicians are clinging to the notion that voters don't know this.

An 8% capital cost allowance works itself through a return on investment, in this article, in 27 years. That means that the LNG operation has to remain decently profitable for a long time. Definitely NOT the pricing behaviour of natural gas, which since 2000 has been wildly volatile and shows no indication of settling down to anything predictable.

Give investors a 30% CCA, and they can be in and out of the project with possibly an acceptable return in seven years. No long-term commitment to anything.

In British Columbia, it's doubly scary, because we have the industry chasing the federal government for breaks - naw, not breaks, flat out giveaways - and in BC the government, and government-to-be, are so needy to show some glimmer of economic light for the province that they'll dive as deeply as they need to go in regulatory relaxation, tax deals, and most scary because it is most obscure, breaks on the cost of the phenomenal amount of electricity an LNG plant requires.

How lame is it that the gas/LNG guys are arguing that chilling gas to a liquid is manufacturing? That's like you saying you're manufacturing ice when you fill your ice cube tray and put it in the freezer.

 

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