“World-Class” BC LNG brings Third World deals with likes of Petronas
It’s possible that the majority of British Columbians would agree with developing our natural gas resources – even for export – if our own energy security was guaranteed, the economic benefits accrued to British Columbians and we did it all in such a way that we are able to maintain our international reputation as an environmental leader and awe-inspiring tourist destination.
However, contrary to the BC Liberal election campaign rhetoric, the government’s LNG development model offers none of this and with the Malaysian state- owned behemoth Petronas as their lead proponent, it’s guaranteed we will reach none of these objectives.
‘World-Class’ rhetoric ushers in Third World-style deals
Christy Clark has made of lot of claims to maintain her hold on BCs most powerful office, chief among them has been the bold but baseless proclamation that her government will erase BC’s fast burgeoning debt and fill a 100 Billion-dollar “Prosperity Fund” by developing our resources in nothing less than “world-class” fashion.
However, while such soundbites may win election campaigns in the developed world, the facts prove that the Clark government’s public narrative is thoroughly divorced from the Third World-style backroom reality that has been driving the BC Liberal LNG negotiation style.
But we have been calling them out for years
Here at The Common Sense Canadian, I have been drilling down to deconstruct the details of the Clark/Coleman public narrative as they have unfolded for years now.
We were also the first to dissect the Harper-approved, Goliath 25-year, $400 billion export deal that was quietly ushered in for Petronas while the media focus was on Enbridge’s Northern Gateway heavy oil pipeline proposal and tar sands expansion under foreign state-owned enterprises (SOE).
At the time, we exposed how Petronas moved to dominate the BC LNG landscape as Stephen Harper offered hollow assurances about foreign SOEs not owning and controlling too much of our domestic resources, all while our own crown corporations were being hobbled and scrapped.
Now, at the eleventh hour as it relates to the fiscal and legislative framework for LNG, it is time to counter Petronas and their “Hard Ball” tactics with some hard ball of our own and not simply rely on the softball antics and deceptive backroom shenanigans of the Clark and Harper regimes.
Petronas ain’t no saint
In recent years, while Petronas was topping out as the most profitable Asian company on record, according to the Fortune 500, they were also becoming mired in several corruption cases – including a series of indictments brought by the US Department of Justice in 2009 for foreign bribery conspiracy.
Another case, announced by the Malaysian Anti-Corruption Commission in 2013, involved two senior Petronas employees charged with money laundering and taking bribes in connection with a pipeline deal. Then, earlier this year, Petronas subsidiary MISC was implicated in a global corruption scandal stretching over 6 years and centering on Dutch company SBC Offshore.
In fact, corruption has been so rampant that the company was forced to develop exhaustive, internal anti-corruption policies to regain credibility. This was all happening at the same time Coleman was signing non-disclosure agreements to begin negotiations on BC LNG.
Since adopting anti-corruption measures and negotiating with BC behind closed doors, Petronas has done deals in Chad – a failed state considered to be of the world’s most corrupt – and signed an agreement with Mexico the same day they threatened to pull out of BC. This despite Mexico’s infamous levels of corruption and inability to keep drug cartels out of their publicly-owned oil and gas infrastructure, as detailed here by VICE News.
So, with a simple google search, we can detect a pattern of corrupt deals done in backrooms, while PR outfits and social license machines manipulate public opinion. Yet in BC, this is apparently the path to “prosperity.”
Foreign trade and investment deals compound threat to BC
The Harper government recently ratified two significant agreements that will impact BC LNG in profound ways with more to come. The FIPPA and South Korea Trade agreements top a long list of MOUs and Letters of Intent that has thoroughly defined how LNG will unfold here in BC for more than a generation.
And that is just the public face of these complex, far-reaching deals. Coleman and his backroom, Third World-style, “confidential” negotiations no doubt involve myriad ugly details – many of which we will never know.
Here is what we do know
Despite Coleman’s non-disclosure agreements, we are able to ascertain some details of the colossal, unprecedented multi-billion dollar fleecing we are about to “lock in” for generations.
BC has already publicly committed to being one of the world’s lowest cost…errr… “most competitive” jurisdictions on earth. We are already reaping the lowest royalty rates in the world. But apparently that is not good enough for the Malaysian government-owned Petronas, which has been historically responsible for up to 50% of that country’s total operating revenue.
The tax rate proposed for exporting LNG will only apply after all costs have been recouped by Petronas and all other LNG proponents. But even then, the rate will be a paltry “up to” 7%, which may start rolling into provincial coffers 3 election cycles after Clark/Coleman promised.
Clark/Coleman are also somehow magically responsible for not only provincial taxation rates but federal export taxes as well, while at the same time imposing caps on the ability of regional and municipal governments to recoup fees and taxation. Gotta love those smoky backrooms.
The BC Liberal government has also committed to allowing LNG proponents to burn natural gas to power LNG facilities, despite longstanding promises and legislation to thwart climate change and meet reduction targets. Moreover, no certainty exists around whether or not provincial taxes will apply or if the much-ballyhooed BC carbon tax will be charged.
Petronas has already secured investment and offtake contracts from India, China, Brunei and Japan. In doing so, they recouped their original 5 billion-dollar-plus investment to takeover Progress Energy and dominate the BC LNG landscape.
Petronas is now seeking up to $15 billion in debt financing to build out their estimated $9-11 billion dollar coastal LNG plant and supporting $5 billion dollar pipeline infrastructure – which would be the largest debt financing deal in our country’s history.
Meanwhile, Petronas has undertaken the single largest drilling expedition in BC history to prove out reserves for LNG export.
Why BC should tell Petronas to get stuffed
Since Harper approved the Petronas takeover of Progress Energy, on a Friday night in 2012, Petronas has displayed why they are the most successful Asian player in this game.
They have secured enough long-term, international investment in our BC fracking fields to recoup the entirety of their original takeover investment – while ensuring they maintain controlling interest – and are still seeking yet another partner in their 400 billion-dollar BC export deal, to reach the 49% share they stated was their international investment target.
They have already long supplied huge markets like Japan, which has historically made up 60% of their LNG offtake agreements, and has partnered with them on this BC LNG scheme.
The deals they have already arranged are of great benefit to foreign-owned SOEs the world over and the debt financing they seek ensures that international trading and financing houses will receive a bigger piece of the BC LNG pie than Coleman has negotiated for BC, with his paltry tax rate for at least the next decade, maybe two.
Petronas requires a secure, long-term supply of oil and natural gas/LNG as their domestic supply is dwindling fast, forcing them to cut deals with dubious regimes in Chad and make unsavoury deals with Mexico.
In other words, BC is vital to their future success and will secure their business plans for decades. As a result, we – the BC public – have them over a barrel, so to speak, but Clark and Coleman have so poorly positioned us that we are not only showing our hand but seem prepared to give away the farm simply to deliver on a deal promised during an election campaign.
The reason Petronas is able to “play hard ball” is because Coleman/Clark and Harper have delayed what should be simple taxation regimes which they have long promised yet failed to deliver – repeatedly. This despite basing their entire economic agenda on oil and gas development, while sitting in backrooms, negotiating these very details with these same companies for years, by their own admission.
All of which means British Columbians and Canadians as a whole are completely dependent on a handful of powerful political players negotiating our destiny under non-disclosure agreements with no accountability, no terms of reference or mandate, and no reason to deliver for average people. It’s just like any Third World country – or Malaysia, for that matter, where the citizens see no appreciable benefits trickling down to improve their quality of life or standard of living.
It’s time British Columbians wake up to these realities – our future depends on it.