Canadian tax cut deflates Woodside's Browse liquefied natural gas project
Woodside Petroleum's nascent ambitions to develop a $C15 billion ($15.14 billion) liquefied natural gas venture in western Canada have received a boost after British Columbia halved a proposed tax on gas export projects - but the same move could hinder its plans for the Browse floating project off Western Australia.
Under the regime, announced overnight Sydney time, a tax of 3.5 per cent will be levied on LNG export projects, compared with the original proposal in February of up to 7 per cent.
The cut came after Malaysian national oil company Petronas threatened to suspend its plans for an LNG venture in Canada. It boosts the prospects for projects there, analysts say.
"It's bad news for Browse because suddenly there's a lot more competition at the high end of the cost curve," said Macquarie Equities analyst Adrian Wood.
"Cheap projects are going to go ahead no matter what, but suddenly if there is momentum behind these high-cost Canadian projects it makes Australia's role in the LNG market that little bit harder."
British Columbia, the westernmost province of Canada, has 18 potential LNG projects that have, among them, invested more than $C7 billion to acquire natural gas assets, with another $C2 billion spent on preparations for gas export infrastructure.
Province Finance Minister Michael de Jong said the government believed the framework "strikes the right balance between a competitive economic environment and a fair return to British Columbians".
RBC analyst Greg Pardy said the tax announcement was "positive" given intensified LNG supply competition from the US, east Africa and elsewhere.
"It would appear that British Columbia's LNG tax will not unduly burden a sector that has yet to come into existence," Mr Pardy told clients.
Woodside's proposal for an LNG project at Grassy Point, about 30 kilometres north of Prince Rupert, is at an early stage, with no indication yet of gas supplies or potential partners.
According to documents filed with regulators in August, Woodside envisages either an onshore export plant or a near-shore floating plant.
The first phase would have between 6 million and 15 million tonnes a year of capacity, costing $C10 billion to $C15 billion.
A Woodside spokeswoman could not immediately comment on the tax change.
The most advanced project in Canada is Shell's LNG Canada venture, which involves major importer Korea Gas Corporation, Mitsubishi and PetroChina.
LNG Canada said it was "pleased to have certainty" over the tax, which "provides balance" to the sector's challenges.
Mr Wood said Shell's involvement in LNG Canada was another hurdle for Browse LNG, where the oil major is Woodside's biggest partner, because it likely has little appetite to undertake both projects simultaneously.
"The front runner seems increasingly likely to be LNG Canada, and I think it's probably just pulled a little bit further ahead."
More details on: smh.com.au