Monday, February 24, 2014

Christy Clark`s LNG Balloon Starts to Deflate(Inside the numbers)

Slowly but surely the BC Liberal Government is climbing down the revenue ladder when it comes to LNG....

Christy Clark pre-election talked about B.C. having 10 LNG plants, specifically Clark mentioned having a couple of LNG plants up and running by 2016...That isn`t going to happen, there are still no final investment decisions, the earliest any final investment decision would be made is 2015, meaning no LNG plant would be producing export product before 2020..

As for having 10 LNG plants, that number is being whittled down everyday, best estimates now are but for 3 LNG plants..

Let me remind you what Christy Clark promised in the way of provincial revenues from LNG..

Eliminate the BC debt, by 2017 our BC debt will stand at $70 billion..

Christy Clark promised a $100 billion dollar prosperity fund..

She suggested eliminating our provincial sales tax through LNG receipts..

Christy Clark promised revenue sharing from \LNG with First Nations, Clark promised monies for northern BC communities impacted by an LNG industry, Christy Clark also promised to pay off crown debts, remove tolls, plus hospital and school infrastructure money, all from LNG..

Let`s just concentrate on the debt and prosperity fund..

$170 billion in promised revenue from LNG..

BC Liberals also claimed LNG would create over 100,000 jobs..

Let`s deal with the job numbers first, a large LNG plant with associated pipeline at peak construction would employ about 3500 people, but that`s at PEAK construction....meaning for the most part of a 5 year build those employment numbers would be 1000 to 2000 at most, per LNG plant.

Assuming 3 LNG plants get built(doubtful) at the same time, at peak construction 10,500 workers required, but only about a 1 year peak construction period, for the majority of  these 5 year builds, 2000 to 6000 workers required..

After these facilities are built, I have researched high n low and as mentioned here many times before, but never mentioned by the BC Liberals or the mainstream media..


Meaning 3 LNG plants would directly employ a mere 1000 employees..

Now let`s discuss the LNG taxation framework...

1-1/2 percent tax on LNG plants until they pay off their build costs ...After build costs are recovered the LNG taxation is to rise to 7 percent..

Once LNG plants are paying the 7% tax, .....that 1-1/2 percent tax they paid earlier is returned to the company...

Now, at those rates, as written in a below post, British Columbia will never come close to achieving those promised revenue amounts under that taxation scheme, never..The LNG market isn`t that large, look at what countries are not customers for LNG..

The Middle East..Russia..Europe...Australia..New Zealand..Canada..USA.....

China will get most of its natural gas from Russian pipelines, pipelines built and more under current construction...India is a customer but their populous is not wealthy, and..India is 16 shipping days further from Canada than it is from Australia...

So that leaves Korea, Vietnam, Philippenes and Japan as customers, as customers in a crowded market that is currently fully satisfied.

Japan will be buying less LNG as their nuclear plants are restarted, if methane hydrates pan out for Japan they won`t be buying any LNG....Prices for long term LNG buying contracts are falling, de-linked from the price of oil..

Back to BC`s proposed taxation level, a level that won`t come close to achieving the BC Liberal`s promised revenue targets....Already these big energy giants are balking at the proposed taxation levels...They are literally threatening to build nothing unless our low rates are slashed..

News on the LNG front is getting worse for these BC Liberals..

First Nations are asking for a piece of the taxation pie..

Now remember, Christy Clark promised First Nations a revenue sharing deal, actually, Christy Clark wandered the province for 2 years promising everybody everything, and LNG was goiung to pay for it all..

I found a very interesting statement is the above linked article, it talks about potential revenue AFTER these 3 LNG plants are paid for...but before I spill the beans, what we are witnessing is a slow but steady continual climb-down on the revenue front...Remember, pay off the debt, create a $100 billion dollar prosperity fund for future generations..

I explained in this post...

I explained that the entire yearly LNG market today is a mere $170 billion, that number will fall in value and LNG quantity as Japan reverts to nuclear power..also highlighted was the myriad of other LNG plant proposals, dozens built and dozens more planned..

From the Vancouver Sun linked article above about First Nation`s wanting a share..


"The first details of the tax for the nascent industry was unveiled by premier Christy Clark`s government last week.

Although legislation is not set to be introduced until the fall, the government has said it wants to put a seven percent tax on income from facilities that produce LNG, after capital costs are recovered.

No companies have made final investment decisions to go ahead on a LNG project, but preliminary provincial estimates show that eventually the new tax could pull in $hundreds of millions per plant each year.

The premier wants to see as many as 5 plants built in B.C. , although critics suggest there will be fewer"


Where have we seen this play before, Gordon Campbell wanted to be an electrical exporting super-power, now we have hundreds of buggered up rivers, BC Hydro is broke and we as a province are losing near $600 million per year on energy sales, the BC Liberals gave private IPP builders guaranteed pay for power and we are selling that power for a dead loss, year after year, for decades we will lose money on electricity sales, and now...LNG..

Each LNG plant with associated natural gas pipeline build cost, plant, pipeline, carrying costs, we are looking at roughly, minimum, $20 billion per operation..

According to the figures above..."Hundreds of millions per year".....That number ($300 million) at 7% of income...That number suggests it will take at least 5 to 8 years to pay off capital build costs.

Multiply $300 million by 13...$3.9 billion per year in gross income...average build cost..$20 billion dollars..

5 to 8 years to pay-off capital build costs..

Now to the heart of the matter....a..quote....

but preliminary provincial estimates show that eventually the new tax could pull in $hundreds of millions per plant each year.

22 to 25 years collecting(eventually) $300 million per year, per plant...Let us assume we get 3 LNG plants..

$300 million, times 3......$900 million in revenue per year, for 22 to 25 years is....

$19 billion to $24 billion dollars, over 30 years, we do have to count the waiting period while companies pay-off their build costs..

Yes that is a lot of money....Our provincial budget is over $40 billion per year, a $1 billion dollar increase per year is adding about 2% to the budget..

The point of this article is to highlight 2 things..

Christy Clark and the BC Liberals job numbers related to LNG are fictional, exaggerated by a factor 10...and there are virtually no direct full-time jobs in these plants, 200 to 300 hundred full-time jobs in each LNG plant....Maybe the media could actually tell the truth, report the facts..

Secondly...The provincial revenue numbers, the above numbers are actually optimistic, I doubt even that much money will be generated, my math, considering how much of the finite LNG market we could access, with declining Asian LNG prices, I estimated $7 to $16 billion over 30 years in taxation revenue from 3 LNG plants..

Even if you doubled this...$19 billion to $24 billion dollars, over 30 years, we do have to count the waiting period while companies pay-off their build costs....To $38 billion to $48 billion over 30 years the numbers are a shadow of what was advertised..

And you can all see, these big energy companies have a desperate prey cornered, balking at the 7% tax in open media, that desperate prey is the BC Liberal government, cornered, perpetuating the illusion of wealth where none exits, sell off all our gas for peanuts, if that tax gets lowered to 5%..or 4%..If that happens BC Will be lucky to collect $5 billion dollars over 30 years, all that gas, all that water poisoned, for less money than a 1/2% increase in our provincial sales tax over 20 years...!!!

Yes, all the above figures are big numbers..

But if you take my numbers, which I believe are the most accurate, once you add in all the social costs of fracking, plus the big push the USA is handing British Columbia for a massive water pipeline to California, under NAFTA we can`t say no...but we can negotiate a price, I believe we can make more money selling pure clean drinking water rather than waste liquid gold fracking for pennies..

The Straight Goods

Cheers Eyes Wide Open



Hugh said...

Yes, but with LNG export we will save the world by getting countries to stop burning coal.

'Course we're planning to export MORE coal. Details.

motorcycleguy said...

Just wait and see..... all of the IPP's located on the BC coast will start exporting water. The penstocks are built considerably oversize for the nameplate capacity. IPP's like the recently approved Narrows Inlet project on the Sunshine Coast operate by draining high alpine lakes. The infrastructure is already there to run the pipe a bit further onto the ocean going bulk water carriers. The water is already deemed an industrial commodity as it is used to produce electricity....NAFTA implications are immense.

Danneau said...

Just listened to Andrew Weaver on the CBC saying that he's going to look for some justification in the government figures for jobs and revenue where he sees some discrepancies. Well ain't that nice. He needs to look around at this blog and several others. Oh, he wants it directly from the government? How naïve is this man? When even the Opposition's Opposition is so milquetoast and worried about fairness and balance, there's little likelihood of real opposition, or of any results. I don't like the infantile posturing that passes for debate in all the chambers across the country, but for the sake of all of us, pin their sorry asses to the wall and have done with it!

Anonymous said...

Didn't China pay for 800 hectares near Prince Rupert? I thought that was where China will build their LNG plant?

Doesn't China also want the 18 mines and the timber, on Vancouver Island? Harper was on Vancouver Island, not all that long ago.

Is not Harper bringing thousands of Chinese over for his, Northern BC mining plan?

Petro-China put in a bid to*help* build the Enbridge pipeline.

China has polluted much of their farmland and 40% of their water. Dead pigs come floating down China's rivers. China has been buying up our farmland to feed them here and in China. China may want our water too.

There is Harper's FIPA deal with China. There is Harper's Omnibus Bill that permits China to sue Canada if, anyone tries to block China's intrusions into our country. China can even sue Canada in the International courts.

Harper's sell-out began way back, during Campbell's reign of terror. Christy is merely a mouthpiece for Harper. She also lies as Harper and Campbell did. I firmly believe all three of them, lied and cheated to win their elections.

If all of this is indeed true? BC belongs to Communist China.

istvan said...

what I get from this is that WE buy the lng plants for the Chinese and PAY them to take out the gas in the ground in the hopes that someday We mite get some benefit.
Why not sell the gas to make BC businesses more profitable?