BC Building Trades AGM

February 18, 2015

Introduction

Thank you for your kind words. It’s a privilege to be in Victoria, and I am delighted to address members of the BC Building Trades.

There is no better organization to discuss L-N-G than the BC Building Trades.   Established in 1967 your organization and members have a long history in helping build this province. There is no doubt in my mind you are integral partner of the LNG industry and moving forward in the months and years ahead will play a valuable role as this industry comes to life.

I know we are here to discuss the natural gas industry, but I believe it’s important I address the prevailing news of the past couple of months.

Falling energy prices have inspired critics to already predict the death of BC’s LNG industry. I am here to say the critics speaks too soon. Present energy market volatility masks a tremendous LNG opportunity in B-C.

While there is great emphasis placed on the spot price of crude oil, I can tell you our members make investment decisions on a longer term pricing horizon.

LNG projects are large undertakings that require tens of billions of dollars of capital investment. Projects therefore must have a strong business case and meet stringent economic tests before they proceed.

Our members today are working towards that goal through diligent project management that ensures projects are properly sited, designed, and constructed.

 

The Alliance

The BC LNG Alliance came together to serve as the common voice for the province’s leading LNG project proponents.

Our mandate is simple, it is to foster the growth of a safe, environmentally and socially responsible LNG industry in BC – an industry that is globally competitive.

And, an industry, that British Columbians can be proud of.

When we first created the Alliance we had four members.  Today we have seven.

They include:

  • Kitimat LNG,
    • Which is a partnership between Chevron Canada and Woodside
  • LNG Canada,
    • Whose partners are Shell Canada, PetroChina, KOGAS and Mitsubishi
  • Pacific Northwest LNG,
    • Which is PETRONAS, JAPEX, Indian Oil Corporation, Sinopec and PetroleumBRUNEI
  • Prince Rupert LNG, which is being proposed by BG Group,
  • Triton LNG – a partnership between AltaGas and Idemitsu Canada, and
  • British Columbia based Woodfibre LNG.

In November the Alliance added its seventh member:

  • ExxonMobil – who is one of the world’s leading corporations. ExxonMobil has been granted an export license by the National Energy Board and has an option to lease a site on Tuck Inlet, near Prince Rupert.

As you can see from this impressive list of companies, the Alliance is made up of LNG industry leaders who bring decades of experience, insight and best practices to British Columbia.

They also bring to BC an abiding commitment to safety, environmental stewardship, community engagement and investment.

Already northern BC residents have witnessed a significant amount of work – in the tens of millions of dollars – being done by our members. These investments have already created jobs and spin-offs in First Nations communities, Prince Rupert, Terrace, Kitimat, Port Edwards, and Squamish.

The projects proposed by our members will constitute the largest investment ever seen in this province.

For example, if just one of the larger LNG projects goes forward it will create more investment in BC than the combined investment of the new Port Mann Bridge, the Canada Skytrain line, the new Vancouver convention center, the South Fraser Perimeter Road, and the upgrade of BC Place.

And importantly, investments made by our members, and the jobs and spin offs they will create, will have a very positive and beneficial effect throughout BC and Canada.

 

 

So what does BC’s natural gas offer Asia?

It is safe to say we would not be having a conversation about a possible LNG industry if we didn’t acknowledge some basic truths.

Energy powers our lives. It shapes how we work and how we communicate.

One of the key forces in the 21st century, is rising energy demand.   By the middle of the century it’s estimated the world population will grow from 7 billion to 9 billion people – with roughly three out of 4 people living in cities.

As living standards rise, people will demand microwaves, TV sets, and fridges – especially in Asia, and particularly in countries like China and India.

Access to energy though isn’t just about watching your favourite show on your big screen TV.   It’s actually the difference between prosperity and poverty.

What critics rarely mention, however, is that access to energy for people in Asia is access to opportunity. Today, 1.3 billion people in the world do not have access to electricity.

Without electricity schools go dark, homes lack clean cooking facilities, and factories cannot provide jobs.

When countries are able to reliably power their homes, vehicles, schools, and businesses the impact is dramatic.

In the past three decades, China has pulled 680 million people out of extreme poverty. That is the equivalent of 20 Canada’s!

This means that the most successful poverty reduction program in the history of the world is called, “China.”

This could not have been done without energy – which powers the fight against poverty.

It amazes me how large tectonic geo-political shifts can sometimes get lost in our 24/7 media culture. As a former journalist who has traveled this province for nearly twenty-five years, and been bureau chief for Global Television in New Delhi and Beijing, I have been fortunate to witness a tremendous amount of history — from colourful BC politicians, to natural disasters, to conflict zones in Pakistan and Afghanistan, to revolutions in the Arab world, to covering the frontlines of globalization in China and India.

Sometimes daily news stories attract so much attention we forget the much bigger forces that are changing the world.

If someone were to ask me what I would consider to be one of the most important story’s of our time, my pick would be the rise of Asia and the needs of its 3 billion new potential capitalists.

It’s not just the rise of China and India, but also the Indonesia’s and the Thailand’s.

The hopes, dreams, fears, AND CONSUMPTION PATTERNS of these three billion people represent are going to drive BC’s economy. They are the true game changers of the 21st century.

Asia’s rise is truly being felt globally and BC’s significant natural gas reserves and our proximity to Asian markets, gives our province an unparalleled opportunity to grow a vibrant new industry, while serving the growing demand for natural gas and a better quality of life in Asia.

To get BC’s LNG’s industry up and running means we must collectively work together to overcome some key challenges.

 

Challenges

From financing, to engineering, to skills training, there are many moving parts when it comes to building a new LNG industry.

It’s a complex endeavour requiring cooperation on many fronts, including the federal, provincial, First Nations, and municipal governments, along with labour and educational institutions.

Since our launch, we have seen the introduction of the LNG tax and GHG legislation.

And, while our members appreciate the government re-visiting its original tax structure we still need certainty and clarity on how these two critical pieces of legislation will be implemented.

For our LNG projects to be viable, we need to strike the right balance that enables British Columbians to receive fair value for the sale of their natural resources, while at the same time recognizing the enormous technical and financial challenges of very large and complex projects with significant risks.

Our members will not only be paying the LNG and carbon tax, but will also have to purchase carbon offsets, as well as paying royalties, PST, GST, payroll, municipal taxes and corporate income taxes.

We have to get it right because our competition is global. From Australia, the US gulf coast, to east Africa there is a race to service the Asian market. There is short term potential that LNG supply may outpace demand, but Asia’s economies will continue to grow dramatically over the next half century.

It means the LNG industry, along with all levels of government, must ensure there are policies in place that enable our industry to reach their full potential.

With falling energy prices, fiscal and regulatory certainty for the LNG industry is even more important today than when the Alliance was launched in October.   Our members need certainty that the overall cost structure they intend to operate in British Columbia is globally competitive.

WE ARE STILL NOT THERE.

However, as I have said before, if we strike the right balance, we CAN be economical and build a safe, sustainable and globally competitive industry right here in BC.

So what are the opportunities and benefits this new industry offers our province and members of BC’s Building Trades?

LNG holds the potential to create tens of thousands of new construction jobs and thousands of new permanent jobs for British Columbians.

For example, on average there will be 3,000 to 7,000 construction workers required for each of the large-scale liquefaction plants.

That number doesn’t include the thousands of new long-term jobs required to operate the plants and support the industry.

And it doesn’t include the jobs created to build and operate the natural gas production facilities in the northeast or the pipelines to get the gas from the production fields to the coast.

Together the seven projects that make up the Alliance represent a total potential investment that will run in the tens of billions of dollars, just for the plants.

That doesn’t include investments in pipelines or upstream production facilities, which will add billions more to the total.

Finally, when the plants are operational they could provide new revenues to all levels of government that may well run into the billions of dollars, each and every year.

Another important feature of the LNG industry, is the very real opportunities it will provide First Nations. Opportunities that provide long-term, sustainable benefits.

As I mentioned, what is also promising is the opportunity LNG development offers labour.

If we were to build four large and two small LNG projects in our province, at peak construction, we would require an additional 30,000 construction workers for upstream and downstream site works, an additional 6,000 engineers, and 100,000 plus off-site jobs over the next five years.

To put that in perspective, imagine if every unemployed British Columbian today had the required qualifications to work in LNG, there still would not be enough people to deliver the projects.

(pause)

…AND THAT’S WHY SKILLS TRAINING MUST BE A MAJOR FOCUS FOR OUR INDUSTRY, FOR GOVERNMENT, AND LABOUR.

We can learn from international examples – as Peter Dybel has shown.

For instance, from 2010 to 2013, construction workforce numbers on major Australian LNG projects increased significantly over a relatively short period of time.

Taking into account, factors like qualifications and experience, training, availability, mobility and temporary foreign labour, the sector saw the average level of experience and skill of the collective workforce decline significantly.

Skills dilution is a concern.

As Peter Dybal has highlighted in many of his reports, major LNG projects in Australia projects saw a significant increase in both labour and cost.

The reduction in job-face productivity particularly meant projects needed more people or more time, or both and certainly more money!

The fact is that qualifications, skills and the sector-specific experience were spread thin, and continued to be spread ever more thinly as demand increased.

While skills dilution significantly impacted productivity at a blue-collar workforce level, the most negative impact was felt at the supervision, engineering and management level.

However, all is not lost! I would like to recognize Premier Christy Clark and her government.

They have done an exceptional job in bringing industry, labour, First Nations and the Province’s post-secondary institutions together under the Premier’s LNG Working Group.

The LNG Working Group has set out a number of recommendations to follow to ensure British Columbia has the skilled labour force it needs to seize this opportunity.

Our president, David Keane, is Vice-Chair of the Executive Committee of the Premier’s LNG Working Group … and rest assured … he and other stakeholders are working diligently to create skills and trades training spaces so British Columbians will be first in line for new LNG related job opportunities.

That is good news, but we must not be complacent. We have to prepare now.

The mix of a skills shortage and fast growth in LNG related construction, had a dramatic impact in Australia.   And we cannot allow that to happen in BC!

 

BC History

No matter how daunting the challenge, we must confidently seize the opportunity before us. History has taught us that British Columbians have built large infrastructure projects – and done them well.

Over fifty years ago, W-A-C Bennett was told he was crazy to spend so much energy and tax dollars building dams, highways, transmission lines, and laying rail tracks.

That vision transformed the economic, social, and cultural face of British Columbia.   In many ways, it’s back to the future. LNG has the same potential today.

The impact of striking the right balance will provide British Columbians with opportunities and benefits for decades to come.

 

Conclusion

So as I conclude, we know that British Columbians not only want to see their environment protected, we also know that they want jobs and a strong economy.

And, yes while there are challenges these challenges are not insurmountable.   But, if we are to seize this once in a life time opportunity, we must all work together.

By finding the right balance, we can take advantage of a rare opportunity and build a new industry that will benefit all British Columbians for generations to come.

Thank you.