British Columbia risks losing its dream of liquefied natural gas riches if it doesn’t move more quickly on the details, a senior Japanese investment adviser has warned as the province’s minister for the file announced another delay of the final details of a tax structure.
Keisuke Tsujimoto, who represents the Japanese government’s energy investment office in Canada, said he can’t yet “give a good report” to his government on investing in the province’s LNG plans after attending this week’s budget announcement of the proposed industry tax.
Rich Coleman said Wednesday the legislation around the LNG tax is being drafted in two segments. One part will be introduced in the fall as promised, but the rest of the package likely won’t be introduced now until the spring of 2015.
Mr. Tsujimoto was in the B.C. Legislature on Tuesday to take in the budget presentation that laid out the tax framework for the LNG industry.
Following briefings with government officials on Wednesday, he said in an interview he still has deep reservations about the province’s ability to establish an enticing framework in a globally competitive industry.
“The LNG tax is very formalized, it seems to be good, for now,” he said. However, he said the province, which is already behind schedule in laying out its formal LNG plan, will be taking a major risk if there are any further delays.
“If the tax is delayed, the B.C. government may lose this big opportunity for energy infrastructure. It needs to happen this fall,” he said.
Mr. Coleman told reporters that investors will have enough information to make final investment decisions by the end of this year.
“The legislation is complicated,” he said. “There are two pieces to it, one of them is the actual tax code – that could come in the spring [but] setting in legislation what the tax is, is the certainty they need to make a final investment decision. That will get done early fall.”
Mr. Coleman said other facets of the LNG framework will be announced in the coming weeks and months.
“I’ve never been on a more complicated file,” he said. “You are getting down to the fundamentals of developing an entire new industry … . Pieces are coming together.”
But the budget on Tuesday offered little detail of how the hoped-for development will be built. Mr. Coleman acknowledged that the expected shortage of skilled labour is a huge concern to potential investors. But there is no new money in this year’s budget to increase skills training. Mr. Coleman said training opportunities need to be developed, but that the government is also working on a plan to recruit workers from other parts of the country, and other parts of the world, to fill the gaps.
The B.C. Liberal government won re-election last year on a campaign that promised a “debt-free B.C.” based on developing an LNG industry. There are currently 12 LNG facilities in the proposal stage – including three with backing from Japanese investors. But none are expected to reach a final investment decision before the tax legislation is tabled in the fall.
Mr. Tsujimoto agreed that the labour issue is one of the top concerns for investors. But he said there is also anxiety about the still-unknown environmental regulatory requirements, which are expected to add up to a significant cost factor. As well, he questioned whether the province’s Oil and Gas Commission, which has about 200 staff, has the capacity to regulate all the related activity. “These are huge projects and the Oil and Gas Commission does not have much staff. I’m afraid their capacity is not good enough.”
Japan is the world’s largest consumer of LNG and is a key target for B.C.’s LNG aspirations. But Mr. Tsujimoto, the Vancouver-based manager for the Japan Oil, Gas and Metals National Corp., a branch of Japan’s energy ministry, noted that his country has already reached final investment decisions in half a dozen other facilities around the world.
“It’s a timing race,” he said.Report Typo/Error