Canada looking at LNG tax breaks in federal budget: document

Thu Feb 12, 2015 5:22pm EST
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By Mike De Souza

OTTAWA (Reuters) - The Canadian government is studying the idea of providing new tax breaks in the upcoming federal budget for companies that build liquefied natural gas (LNG) export terminals, according to internal records obtained by Reuters.

Such incentives could help companies move forward with stalled developments in Canada, even as they cut spending around the world in response to plummeting oil prices.

More than a dozen LNG terminals have been proposed in Canada, mostly in the West Coast province of British Columbia. Backed by energy giants like Malaysia's Petronas, Royal Dutch Shell (RDSa.L: Quote) and Chevron Corp (CVX.N: Quote), the projects would ship cheaper North American gas to Asian markets.

But backers have long complained that development costs for these projects are high and margins are thin. There are no Canadian LNG export plants in operation now.

To help speed development, the Canadian Association of Petroleum Producers (CAPP) wants Ottawa to reclassify LNG export plants as manufacturing assets.

Under their current classification, LNG facilities in Canada can write off 8 percent of their total capital investment each year.

A government memo said that if finance officials accepted the industry proposal, LNG export plants could write off 30 to 50 percent of their capital investment per year.

Manufacturing assets have benefited from the 50 per cent capital cost allowance rate since 2007, which allows companies involved in manufacturing and processing to write off capital investments within two or three years.   Continued...

Cranes work in the water at the Kitimat LNG site near Kitimat, in northwestern British Columbia on April 13, 2014.  REUTERS/Julie Gordon