Thank you for your kind words. It’s a privilege to be here this afternoon, and I am delighted to address participants at the B-C Power Symposium.
Before I begin, I would also like to thank the Coast Salish people for allowing me to enter their traditional territory.
There is no better location to discuss power than a province like ours – one of the top hydro-power producers in the world.
I have been fortunate to travel this province, and I can tell you there isn’t a corner of B-C that hasn’t been impacted by the visionary thinking of W-A-C Bennet and the talented people of BC Hydro. It was in the 1960’s and 1970’s when this province took on some of the most ambitious hydro-electric construction projects in the world. We are benefiting from that thinking to this day.
In many ways, today’s conversation surrounding the nascent L-N-G industry is quite similar. It’s a reminder of how important the development of this industry is to British Columbians.
I know we are here to discuss the power 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. As president of the BC LNG Alliance 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 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.
- 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 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.
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.
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 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?
Not only, does the LNG industry hold 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.
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.
For those of you in the power sector, there are tremendous opportunities as well.
The Conference Board of Canada predicts investment in new generation capacity between 2010 and 2030 could hit seventy four billion dollars in BC, Alberta, and Saskatchewan, compared with 122-billion in the rest of Canada.
This is evident with the recent announcement by the BC government to build the 8.8 billion dollar Site C hydro-electric dam on the Peace River, which will provide a century of clean power and 11-hundred megawatts of capacity – enough to power 450-thousand homes per year in BC.
That’s a lot of generated power for sure – but still not enough to fuel an LNG industry. Let us be absolutely clear, BC’s present electrical grid CANNOT supply the tremendous amount of power required to build a large scale LNG industry.
To help put this in perspective, remember one large LNG facility requires atleast 800-megawatts of capacity. Meaning two site C dams could not generate enough electricity to power three large LNG facilities.
This means, the majority of the power required to compress and liquefy natural gas will come from consuming natural gas itself.
Late last year, one of our proponents, Shell led LNG Canada signed an agreement to purchase power for its ancillary needs from BC Hydro’s grid. Using a combination of renewable energy and natural gas, Shell and its partners will be able to build a facility that will remain below the new GHG emission threshold. This will be accomplished with Shell paying $83 per megawatt hour, instead of the new $67 Site C price.
This shows LNG proponents are choosing electricity for their ancillary needs. The demands from the LNG industry, and continued growth in our province will mean BC Hydro will have to look towards new generation. This is good news for those of you working in our province’s fledgling renewable energy sector.
From wind to run-of-river operators, LNG can provide opportunities to independent power producers.
One final note on the Site C project, it’s estimated construction of the dam would take eight years with early work beginning this summer. The timeline could overlap with LNG and other industrial projects, potentially creating a labour crunch and inflating project costs.
A recent study looking at Canada’s LNG preparedness, conducted by Pit Crew Management Consulting, shows the challenges we as a province face.
In one scenario, the study assumed four large and two small LNG projects were to move ahead in BC.
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.
…AND THAT’S WHY SKILLS TRAINING MUST BE A MAJOR FOCUS FOR OUR INDUSTRY, FOR GOVERNMENT, AND LABOUR.
Additionally, we must also be concerned with what Peter Dyball of Pit Crew terms “Skills Dilution”.
For instance, from 2010 to 2013, construction workforce numbers on Australian major projects increased significantly over a relatively short period of time.
Taking into account outcomes of the critical factors regarding 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.
This as you can imagine, impacted job-face productivity.
However, all is not lost! I would like to recognize Premier 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.
I’m now Vice-Chair of the Executive Committee of the Premier’s LNG Working Group … and rest assured … we are working diligently to create skills and trades training spaces so British Columbians will be first in line for new LNG related job opportunities.
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.