British Columbia Planned LNG Wealth Fund to Focus on Debt

British Columbia Finance Minister Michael de Jong says plans for a wealth fund from liquefied natural gas tax revenues in coming years will focus on debt reduction.

The government’s objective is to “systemically and statutorily prevent governments from raiding the cookie jar” and devote proceeds first to debt reduction, de Jong said today at the Bloomberg Canadian Bond Conference in New York.

British Columbia, Canada’s third-most-populous province, is grappling with a slowing economy and rising debt relative to gross domestic product. Premier Christy Clark said earlier this year that tax revenue from LNG projects could be as high as C$260 billion ($252 billion).

Royal Dutch Shell Plc (RDSA), Chevron Corp. (CVX) and BG Group (BG/) have proposed projects along Canada’s Pacific Coast to liquefy natural gas produced from shale formations for shipment by tanker to Asian markets, where buyers will pay almost five times the North American price. Uncertainty for LNG prices threatens some investment in the sector, de Jong said.

“The greatest measure of uncertainty that I sense from agencies on the verge of making investments is the uncertainty around pricing,” he said. The minister said four unnamed LNG projects in the northern part of the province will be a “renaissance” for the economy.

Gas Prices

Supplies of the power-station fuel for delivery over the next four to eight weeks in Northeast Asia rose to $15.35 per million British thermal units in the period ended Sept. 9, from $15.25 the previous week, Energy Intelligence Group, a New York-based research company, said on the website of its World Gas Intelligence publication. That compares with $3.638 per million British thermal units for October delivery on the New York Mercantile Exchange.

Norway’s sovereign wealth fund, the world’s largest at $760 billion, would be more of a model for British Columbia than Alberta’s Heritage Fund, which was set up by former Premier Peter Lougheed in the 1970s to capture royalties from oil and gas extraction and which has languished at about C$15 billion.

“We’ll be consulting with citizenry on the form that fund takes,” de Jong said. “We don’t see funds flowing into it until industry is up and ready.”

To contact the reporters on this story: Christopher Donville in New York at cjdonville@bloomberg.net; Jeremy van Loon in Calgary at jvanloon@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net

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