BC LNG: Promised Land of Prosperity or Gas Fueled Race to the Bottom?
by Kevin Logan
On this the first day of BC's much ballyhooed International LNG conference, it is worth noting, comparing and contrasting BC's LNG "model" and that of competing Nations around the world in the natural gas industry.Particularly noteworthy is today's announcement that Russia and China have signed the biggest gas deal in the "history of the world." (watch this before reading the rest of this piece).
This is of importance given the reliance the current government has with China as a destination market, and its strange propensity to sanction Russia over the contentious Ukranian issues that some say are driving Russia into the arms of China.
The values of the China/Russia so-called "biggest deal in history," mirror almost exactly those involved in the BC / Petronas deal.
At the time of the Petronas BC announcement I published this piece at Common Sense Canadian outlining the 25 year 400 Billion dollar deal, and now we see Russia boasting about their 30 year, 400 Billion dollar landmark deal with China.
Moreover, BC is boasting that their Petronas deal will see some 68 Billion dollars in total investment over the life of that arrangement, once again mirroring the 70+ billion dollars that China and Russia will be investing in the required infrastructure.
The big difference of course is that Russia is celebrating the largest deal in its history while we were simply negotiating behind closed doors and handing it all over to foreign interests.
You will notice the pomp and ceremony of this deal between China and Russia, meanwhile when we handed over 25 years of supply to Petronas (and others dwarfing the Tarsands in oil equivalent), hardly anyone heard about it. Why is that you think?
Could it be that Russia intends to be on the receiving end of the 400 Billion dollars in gas revenue, whereas the deals BC and Canada have structured see us on the receiving end of, well, not much at all actually.
Instead of getting paid for the gas and celebrating 400 Billion in new revenues as Russia is, we are instead celebrating the fact that Petronas will have to invest in infrastructure to take all of our gas and that there might be a few jobs involved when we "re-engineer" our entire education system.
In fact, the paltry LNG tax ( I wrote about here) that the Liberals promised prosperity is based on is already being eroded away before we even break ground on one LNG plant. This leaves us almost entirely reliant on "Royalty Rates" on the drilling (fracking) side of the LNG equation which Rich Coleman has already said there will be no changes in and as a result will remain the lowest in North America and in most parts of the world.
See Northern Insights blog here as Natural gas revenues are decreasingly relevant to our "prosperity." And see where Ernst and Young bolster the government model here estimating a 200 billion dollar LNG investment potential, however you have to ask yourself, if they are investing 200 Billion how much gas/value are they intending for a return on that investment? Well, unlike Russia those returns will not stay in Canada and instead will just be "trillions" jotted down in new GDP figures, benefiting mostly foreign interests and but a few Canadians.
So that leaves jobs right? Well not so much, it was reported this week in the Globe and Mail that Trade Agreements with our new LNG destination markets dictate that foreign workers must be allowed in to work on these foreign investment projects in Canada.
Moreover, BC just "celebrated" the so called 'Canadian LNG's' announcement that foreign owners will be hiring foreign contractors on the leading and most likely to succeed LNG projects.
But don't worry... because as reported here...."Some local suppliers and "picks and shovels" business are going to reap the rewards from the 20 years-plus construction boom."
So if concrete, picks and shovels are your thing you are in luck! Makes you wonder exactly what skills we need that validate the entire re-engineering of our education system... doesn't it?
China is investing 22 Billion up front in the Gas Deal reached today in Russia - "Upfront" - where as in BC, any and all investment by Petronas will be handed back in the form of tax credits, probably on both royalties and the proposed tier 1 LNG tax rate of 1.5% because both are so low that it will take decades to recoup the capital costs as BC has promised based on these paltry tax rates (remember Ernst and Young is estimating 200 Billion investment as linked above).
Meanwhile Petronas already has the 25 year export license in hand and the recent, not legally binding, 'Letter of Intent' was more a request for certainty on tax rates into the future than a commitment on their behalf to prosperity for BC .
Moreover, Petronas has already sold off huge, long- term, "off-take" contracts for LNG supply to India, Japan, China and Brunei, as well as still searching for a final partner. In so doing they have already regained their original investment in Canada "approved by Harper" over a year ago as the last of a "trend" where foreign SOEs displace Canadian interests.
So what we have here is Foreign SOEs displacing domestic ones and foreign policy that is so contradictory and incoherent it is impossible to understand how Canadians benefit.
In addition to Trade Agreements that lock down future governments and sweetheart oil and gas exploitation deals mirroring that of third world countries where the populace is impoverished while the resource wealth is stripped out beneath their feet and politicians "celebrate" with lavish self-congratulatory events.
Its time to wake up BC, your prosperity is slipping away and your economy is about to be fracked beyond recognition, unless of course you are into "picks and shovels" and digging your own grave.
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