The Straight Goods
What is going on with LNG for export development in British Columbia, it really is an important question?
For several years at least we have been hearing about our financial saviour in waiting, the LNG industry, in the last year this fledging industry’s rosy forecast have been front in center in expensive ad campaigns, the promise of a need for millions of workers, the promises of $trillions of dollars in revenue, numbers so large, numbers so lucrative that soon our roads will not only get the potholes fixed but be repaved with gold, wealth beyond our dreams, who needs “chump-change” tar sand coinage when British Columbia can start our own mint fuelled by natural gas..
Why the delay, why the holdup, for years LNG producers have been talking a good game and they really have spread LNG promotional sauce liberally over the last 18 months, so why is nothing happening, why indeed..
Companies pitting countries against each other, the race to the bottom, who will giveth the most, who will look the other way while corporate corruption skews the books, plays the field and creates another corporate welfare industry..
Alberta, a $6 billion dollar deficit this year, their 5th deficit in a row, all the development, foreign investment, big corporate takeovers with massive premiums paid on share prices, the most oil and gas production in their history and the deficits to Government are growing exponentially each year…Why, how can this be, by accident, by market forces, or by sinister corporate design, the race to the bottom, subsidies, kickbacks, financial fraud and offshore tax havens, you can`t name just one of those items because those corporate activities are all in play, all of the time, including deliberate corporate fraud…
Let’s look at Australia, $100s of billions of dollars have been and are being invested in LNG export terminals and related facilities, every LNG project from every company doing business in Australia, every single project is and has gone over-budget by 30%..40%..50% even by 100% in some cases…A Chevron LNG plant build, Chevron’s Gorgon LNG plant has ballooned from a $30 billion dollar build cost to now an estimated $60 billion dollars plus. And Chevron isn’t alone, every company building similar facilities have seen similar cost over-runs. Coincidence, bad luck, how about deliberate guile and deception, how about corruption, ingrained systemic corporate corruption..
What if I told you the Australian Government pays 30% of all LNG capital costs, meaning company X building an LNG export terminal in Australia, they budget $30 billion dollars for the build, $10 billion dollars of that money comes back to the company as tax breaks and or subsidies, and just imagine if the corporate petroleum industry and their many partners colluded to bring build costs up, and up, and up, projects all running 40%..50%..60%..100% over budget, with winks and nods and corporate guile company X doesn`t receive $10 billion dollars back from the $30 billion dollar build but receives back from Government(public tax dollars) a sum of $34 billion dollars on an inflated $100 billion dollar build..In a sense, systemic corporate corruption has found a legal loophole to have the general public in Australia pay for the entirety of the LNG plant builds…!
With a wink, with a nod, supplier A doubles his prices, producer Q triples his cost, all bills flow to the general corporate contractor where this excess gravy is skimmed right back to the general corporate builder….In other words it`s a ponzi scheme, exactly what is going on in the Alberta tar sands, the more oil production being done the financially poorer the province gets, British Columbia LNG exporters want in on the action,….
_______
From Perry Williams and Jennifer Hewett….
“Australia’s biggest ever resources development, Chevron’s Gorgon liquefied natural gas project, faces a $20 billion cost blowout to more than $60 billion because of the high dollar, union demands, high-cost local manufacturing and productivity issues……
The Gorgon cost blowout means the budgets of new LNG projects in Australia and Papua New Guinea have increased by more than $35 billion since May last year.
On Monday, ExxonMobil, Oil Search and Santos raised their estimated cost of PNG LNG by $US3.3 billion to $US19 billion and cited the higher than expected Australian dollar, delays in accessing land, bad weather and logistical difficulties.
PNG LNG is just the latest in a string of cost rises among Australasia’s unprecedented line-up of LNG construction ventures.
Woodside Petroleum’s $15 billion Pluto venture ended more than a quarter over budget, while BG Group and Santos have both had to lift the cost estimates for their coal seam gas-based LNG projects in Queensland.”
http://www.afr.com/p/national/huge_lng_cost_blowout_kaLHigEKnRVunB0go7TRkJ
http://www.arcticgas.gov/2012/cost-overruns-could-hurt-competitiveness-australia-lng
http://www.telegraph.co.uk/finance/newsbysector/epic/bgdot/9244190/BG-Group-shares-hit-by-5.4bn-cost-overruns-on-Australian-LNG-project.html
http://www.ft.com/intl/cms/s/0/62e4f5e8-3f84-11e2-b0ce-00144feabdc0.html#axzz2KdUKKDdT
http://www.smh.com.au/business/too-much-too-soon-has-left-lng-industry-overstretched-20120803-23kit.html
http://www.downstreamtoday.com/news/article.aspx?a_id=36651&AspxAutoDetectCookieSupport=1
http://www.forexlive.com/blog/2012/11/19/shell-having-second-thoughts-on-australian-lng-investments/
http://www.macrobusiness.com.au/2012/11/drunken-insights-lead-the-lng-debacle/
If you peruse those above links the picture becomes very clear, LNG is a welfare industry on steroids, the Australian Government will probably never get back their investment of public tax dollars
You see what is going on, imagine $300 billion is being spent on LNG facilities in Australia(It`s true), guess what, the Australian public has to surrender back to the corporation…$100 billion dollars…And if that $300 billion dollar upfront cost was really only $100 billion in value. With winks, nods and monies flowing from Company X’s left hand to the Company X’s right hand…Then in reality the tax payer is paying for everything, in other words, corporate welfare on steroids…
The exact same scenario is playing itself out in Alberta, the petroleum producers are crying about paying discounts to the refiners, paying a per-barrel discount of up to..$30 dollars per barrel, yet these oil extractors also own the refineries, in other words, Alberta Tar oil, (which is more expensive to refine because tar oil has to go through what is called an up-grader first, then on to a regular refinery) is being peddled cheap to the refiners, this allows the tar oil extractors to claim big losses in the oil patch, it allows companies to pay almost no royalties, just look at Alberta’s massive yearly deficits that have all accrued under a Stephen Harper oil obsessed Federal Government, coincidence?. Not a chance..
These so-called steep Alberta oil extract discounts are not being passed on to consumers, prices at the pump are at record highs, what we are witnessing is big corporate oil companies have figured out ways to avoid paying any taxes, one hand of a company that pays royalties to Governments loses money to avoid paying anything, the right hand of the company that refines, gets the discounts, make huge margins of money, money not subject to capital gains or royalties, it`s all a shell game designed by big oil to avoid paying any taxes, hence Alberta running its 5th straight massive multi-$billion dollar deficit, this deficit $6 billion dollars…
This linked story by Robyn Allen explains the Alberta discount oil shell game in detail
http://thetyee.ca/Opinion/2013/01/29/Canadian-Oil-Producers/)
So LNG exporters are proposing spending $150 billion dollars on LNG facilities in BC, and if like Australia the projects all balloon way over budget, let`s say they claim spending $300 billion dollars after all is said and done…..
Well, blow my socks off, I was wondering why there was delay after delay for actually starting the builds of any of the proposed LNG facilities in British Columbia, I`m not wondering anymore, the one issue front and center, securing long-term contracts from Asian buyers at lucrative prices has been a non-starter, no one will sign the papers, that reason is obvious, the price is low, there`s a world glut including China itself which has a 300 year domestic supply of natural gas, LNG exporters are just like our IPP run of river companies who did nothing, built nothing, acted only on their own behalf, laid out no money to build 1 kilowatt of power without 30 and 40 year guaranteed contracts, contracts that Gordon the thief Campbell was more than willing to sign IPP`s did not take one single risk, we, that taxpayers, the BC Hydro ratepayers were ripped off…
So anyway, here I was musing to myself as to why BC LNG exporters, why the proposed LNG exporters who by the way have already been granted export licenses haven’t pulled the go-ahead and build lever, finding countries to sign long-term energy buying contracts has been problematic at best, in other words, there are no takers…The other issue is a cheap supply of electrical power, no, make that other issue LNG exporters wanting a free supply electrical energy, LNG exporters require massive amounts of electricity to freeze natural gas, LNG producers do NOT want to use their own product to generate electricity, they want Site-C dam built and they want IPP expensive power, with a caveat, they want you the taxpayer guaranteeing the payment to IPPs for 40 years, they want this expensive niche power for virtually free, only one problem, there is no free power, these IPPs are guaranteed $140 kilowatt or more, guaranteed for 40 years, and as we are dumping excess power now, no buyers, LNG exporters are using that exact argument to justify free power, that and the we must be competitive with other countries argument..
I knew those above two issues were major stumbling blocks for the emerging corporate welfare industry, but today it was confirmed by a representative CAPP(Canadian Association of Petroleum Producers) that these are issues, and more, Jeff Morrison confirmed that LNG producers, proposed builders of LNG export facilities in British Columbia, LNG pipelines, LNG terminals will not build anything unless……
Unless the BC Government and the Federal Government agree to allow 30% capital cost allowances, meaning they want a 30% subsidy on the money spent building facilities, the CAPP representative claims that unless BC and Canada MATCH the capital building allowances of Australia they won’t be able to compete…!
Blow my socks off, read again what is going on with cost over-runs in Australia, picture this, LNG facility builders(on paper) claim to spend $300 billion dollars, you taxpayers are on the hook for $100 billion dollars, meaning we the public, the Government won’t see one single $dollar of real money until we surpass $100 billion in LNG royalties paid, only after that, after the $100 billion mark in royalty revenue would we see any money at all, and I doubt we will ever see that amount of royalties paid..
And if LNG exporters, like the Tar sand diggers, claim discounts to their right arm refining buddies, if world LNG prices are so low that royalties aren`t paid at all, then we will find ourselves like Alberta, more and more environmental damage, more and more tar sand extraction and more multi-$billion dollar deficits..
[…] A representative from CAPP, Jeff Morrison speaking on behalf of BC’s LNG industry said […] LNG facility producers like Apache, Chevron, Shell, EnCana gas, all of them want and need to have the LNG industry re-classified as a manufacturing industry and be able to have the ability to write off all provincial taxes plus a 30%(To match Australia) capital expense subsidy..
And yet Christy Clark’s jobs advertising blitz, her advertising the hell out of a LNG future paved with gold, claiming $trillions of dollars for BC, millions of needed workers, the talk of lucrative Asian pricing, just build it and gold will rain from the sky, and as I and others suspected, behind the scenes, tax breaks, subsidies, capital write-offs, bribery, subtle threats, pitting country against country is going on…If this industry is so lucrative why won’t they build it on their own dime, why do they need re-classification, why the need of huge subsidies..
This is indeed a boondoggle in the works, Cheniere energy in the USA has signed long-term energy buying contracts with Asia, at about 1/3 of the proposed selling price Christy Clark and Pat Bell talk about. At $6 dollars per unit these expensive proposed British Columbia LNG freezers will never make money or even pay for themselves, let alone supply BC Governments substantial revenues..
Cue up February 11th..10:00 am, fast forward to just past the 10:30 am news..
http://www.cknw.com/news/audiovault/index.aspx
Listen to CAPP representative Jeff Morrison on cknw cry for Government handouts and subsidies, listen to Jeff Morrison using the (we must be competitive with what the Australia Government offers card) And if the next country or Province offers even more corporate tax incentives (Right movie industry?)
LNG producers can’t get long-term energy buying contracts, 2 export licenses have been already been granted, 1 of them for almost 2 years now, what are they waiting for, still nothing built, nothing started, back-room discussions are going on right now, talks about reclassifying the LNG industry to Manufacturer status which will in turn bring a 30% plus capital cost subsidy, the companies also want their own HST, the ability to write off all provincial taxes. The hold-up is about making Canadian taxpayers pay for big oil’s profits through subsidies, tax-breaks and guile. For a promise of some employment our Governments are on the verge of allowing corporate raiders to dig deep into your pockets ..
Big Corporate Oil n Gas Companies are asking British Columbians and Canadians to trust them. Look to Australia and Qatar and see this ponzi scheme being played out, or look one province over to Alberta and see them going backwards, their largest ever deficit this year, their 5th in succession, see big oil companies playing the Wildrose Province for a sucker, as their yearly provincial deficits grow and grow despite massive tar sand development..
Source: The Straight Goods
