B. C. to extend $ 120- million oil, gas credits

Follows similar amount last year to promote development at Kitimat and northern pipeline

Up to $ 120 million in royalty credits for the oil and natural gas industry will be provided this year as part of its continuing strategy to encourage development of infrastructure in the province, the British Columbia government announced Thursday

The royalty credits can be applied to expenditures on needed infrastructure in the oil and gas sector, according to a news release from the provincial ministry of energy and mines.

The government expects this instalment of the program, which has been in effect since 2004, to foster development of liquefied natural gas plants at Kitimat, and a pipeline opening the gas fields in the province’s northeast to new markets in Asia.

The province awarded the full $ 120 million available for royalty credits in 2011; in 2010, it awarded $ 115.6 million.

“We are a province rich in natural gas and we need the infrastructure in place to facilitate associated economic activity,” Energy and Mines Minister Rich Coleman said in the release.

Travis Davies, of the Canadian Association of Petroleum Producers, said in an interview the program is important to British Columbia producers because many of the gas fields are isolated from markets, and require more infrastructure.

Besides pipelines, he said infrastructure projects could be as elementary as roads.

He said he expects there will be considerable interest in the program despite the downturn in gas prices.

“B. C. has done some creative things to stimulate and facilitate greater development,” he said. “When you are dealing with a resource area as vast and as isolated as some of the plays in B. C. are, it’s important there is that incentive to build the infrastructure and to make it economic for people. It goes toward the future of the resource and having lower- cost inputs down the road.”

He said oil and gas activity in B. C. has remained relatively robust because of the potential for a liquefied natural gas pipeline to Kitimat and development of LNG terminals there.

The province credits the program with bringing more than $ 1.4 billion in capital investment into the province and creating about $ 5 billion in drilling and other related activities since its inception in 2004.

Applicants must fund the entire cost of their project and once it is completed, they can apply to recover up to 50 per cent of the approved project’s costs through credits that reduce the royalties they must remit to government based on the volume of gas they produce.

The province estimates it will receive $ 398 million in gas royalties in fiscal 2012- 13, according to the provincial budget tabled Tuesday. Royalties are expected to climb to $ 652 million in 2013- 14, partly because of the royalty credits program, the budget document states.

The province expects this year’s royalty credit program to pay for itself by generating new royalties in five years’ time valued at $ 300 million.