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Canada offers tax breaks for LNG

Nation's energy regulator, NEB, says LNG facing economic headwinds.

By Daniel J. Graeber

SURREY, British Columbia, Feb. 20 (UPI) -- The Canadian government is offering tax breaks to encourage the development of an emerging liquefied natural gas industry, the prime minister said.

Capital spending through 2024 may be eligible for a 30 percent tax relief on equipment and a 10 percent break on facilities that would be used in the nation's LNG industry. Canadian Prime Minister Stephen Harper announced the measure was meant to create the right conditions for the nation's LNG sector to be competitive on a global scale.

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"Through our ambitious trade agenda, we are opening new markets for Canadian businesses and developing the infrastructure to transport Canadian products to new markets, which is essential for Canada's future prosperity and security," he said in a statement Thursday.

Harper has tried to diversify an export economy that relies almost exclusively on the United States as its destination for oil and natural gas. A March free-trade deal with South Korea, which included LNG arrangements, was Canada's first with an Asian power.

South Korea is the second-largest importer of liquefied natural gas in the world. For Harper, who made the tax announcement alongside western Canadian leaders, LNG shipments from the western coast are central for diversification.

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A report from Canada's National Energy Board said conventional natural gas exports have declined in part in response to the growing production of gas from shale deposits in the United States. NEB said it's received more than 20 LNG export licenses since 2014, though export terminals have yet to break ground.

Malaysian oil and gas company Petronas announced in December it was delaying an LNG project on the western Canadian coast because of cost concerns. The NEB said that, because of costs and demand dynamics, only the most competitive LNG projects will succeed.

"LNG contracts are typically indexed to crude oil prices, so any sustained decline in crude oil prices will likely dampen investment in new LNG liquefaction terminals," it added.

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