David Keane: Speech to Vancouver Board of Trade

October 8, 2014

Mr. David Keane
President, BC LNG Alliance
Remarks to the Vancouver Board of Trade
Vancouver, BC

Thank you for those kind words Rod. And Ian, thank you for inviting the B.C. LNG Alliance to participate in the Vancouver Board of Trade’s Energy Forum.

I am delighted to be with you this afternoon. And I’m honoured to be on the traditional lands of the Coast Salish people.

I also am very pleased to join such a strong roster of panellists and speakers at this year’s Energy Forum, not the least of which is the Honourable John Rustad, B.C.’s Minister of Aboriginal Relations and Reconciliation.

As the new President of a new organization representing a new industry in B.C., there is a lot I could say today. In the next few minutes I want to tell you why we, the BC LNG Alliance, see LNG as a rare opportunity that presents British Columbians with a tremendous upside, if we get it right.

The projects proposed by our members could constitute the largest investment ever seen in this province. Frankly, even if just one of the large LNG projects goes ahead, it will stand as the largest single investment ever made in this province.

But importantly, the investments made by our members, and the jobs and spin offs they would create will have a very positive and beneficial effect on British Columbia’s economy for decades to come.

When I was first asked to address the Vancouver Board of Trade, I thought: what could I say that will have an impact on you?

As leaders in your businesses and in your communities, you are all important to the success of this new industry in British Columbia. In fact, I don’t think I’m exaggerating when I say you all have a stake in the success of LNG.

So today, I am going to bring you up to speed on the BC LNG Alliance and share our perspectives on three topics:

  • Who the Alliance is and why we’ve come together;
  • What the opportunities are with LNG; and
  • Importantly, the challenges we must overcome to be successful.

On this last point, I want to share with you today that a new LNG industry in British Columbia is not a forgone conclusion.

If LNG is to be a viable industry in British Columbia, some difficult decisions will need to be made.

There are challenges ahead. But fortunately, these challenges are not insurmountable.

I have spent 33 years working in the oil and gas sector, having started my career with Conoco in 1981. For the last 10 years I have been directly involved in the LNG sector, which is what brought me to Vancouver about 4 years ago.

During my time in the industry, I’ve worked in fifteen different countries.

I’ve seen project proponents face countless challenges and opportunities and many disappointments and breakthroughs. You name it, I’ve seen it.

So I know—and our industry knows—what it takes to get these types of projects across the finish line. It’s not easy.

  • It takes a laser-like focus on the part of the industry;
  • It takes a commitment from government to address the issues and roadblocks; and
  • Importantly, it takes willingness on the part of industry and government to work together to achieve success.

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

Our mandate is to foster the growth of a safe, environmentally and socially responsible LNG industry in B.C. that is globally competitive – an industry that British Columbians can be proud of.

The Alliance has four founding members. These include Kitimat LNG, which is a partnership between Chevron Canada and Apache Canada Ltd.; LNG Canada, whose partners are Shell Canada, PetroChina, KOGAS and Mitsubishi; Pacific Northwest LNG, which is PETRONAS, JAPEX, Indian Oil Corporation, Sinopec and PetroleumBRUNEI; and Prince Rupert LNG, which is being proposed by BG Canada.

The Alliance however is also very pleased we have two new members: Woodfibre LNG joined the Alliance on October 1, and Triton LNG, whose partners are AltaGas and Idemitsu Canada, joined us that same day.

Our Alliance is made up of LNG industry leaders who bring decades of experience, insight and best practices to British Columbia.

Part of our role will be to provide British Columbians with reliable information on LNG, our operations and best practices, and the challenges and opportunities we face as a new industry.

The Alliance will engage with, listen to and address the concerns of First Nations, communities and stakeholders. Our mandate will see us engage with all levels of government, including the federal government, provincial government, First Nations and municipal governments.

I’ve spent the last few days in the province’s Northwest, meeting community and First Nation leaders throughout the region.

We launched the Alliance yesterday in Terrace. We did so because it was important for our members to show first-hand how important northern British Columbia is to this new industry

The enthusiasm and support for our industry is real and very strong in B.C.’s north. Northern communities are keenly aware of our industry and what it offers. Having said that, we know the awareness of our industry is not where it could be in the Lower Mainland.

 

Opportunities

So what are the opportunities and benefits this new industry offers our province?

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 three to 4,000 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 northeast B.C. or the pipelines to get the gas to the coast.

Together the six 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, each and every year. Another important feature of LNG industry is the very real opportunities it will provide to First Nations. This is an aspect of the industry that is very promising.

Our members are working closely and collaboratively with their First Nations partners. These partnerships must be long-term, sustainable and mutually beneficial. Many First Nation communities are already benefitting from project work that’s taking place as companies move toward their Final Investment Decisions.

Against this background, LNG offers this province a rare opportunity to build a new industry that will benefit British Columbians across the board for decades to come.

As you can see, there are plenty of reasons to get LNG right. If we get it right, we can be competitive.

If we get it right we can successfully compete for a piece of the LNG market along with the U.S. Australia, East Africa, and Russia.

 

Challenges

If we get it right, B.C.’s LNG industry is poised for a bright future. Fundamentally, however, we face four major challenges in positioning B.C. to become globally competitive. These include:

  • Public misunderstanding of our industry;
  • The need for skilled workers;
  • A recognition of our role in lowering global greenhouse gas emissions; and
  • Last but not least, the need for certainty, clarity and a stable fiscal framework.

According to my members, the need for certainty and clarity in the fiscal framework is paramount. I’ll speak briefly about the first three challenges before I move to the last.

Having worked around the globe, I have come to learn that British Columbia is in many ways unique. Clearly, there are strong opinions about resource development in British Columbia.

We know British Columbians care about environmental protection. And we know that British Columbians are concerned about climate change.

We also know British Columbians want jobs and a strong economy.

And we know British Columbians are generally supportive of LNG, and want to see our industry succeed. Yet when you scratch the surface, most British Columbians don’t know what LNG is or how our industry works.

We need to explain who we are and what we do. We need to earn British Columbians trust and we’re prepared to do that in the days ahead.

We need to explain the facts, and answer questions — even the tough ones.

For example, we want to make sure that people know that natural gas pipelines are built to the highest standards and have been safely transporting natural gas in this province for over 60 years.

We want them to know that LNG carriers are safe and have carried LNG around the world without a significant incident since the 1960s.

We want to make sure British Columbians know that we are committed to investing in and contributing to the communities where we operate.

And that when it comes to training and employment opportunities in the LNG industry, British Columbians are at the front of the line.

Here, I would like to recognize Premier Clark and her government.

They have done an exceptional job in bringing industry, organized 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.

Another important area for British Columbians to consider is how natural gas can help reduce Green House Gases emissions globally.

Natural gas is the cleanest burning fossil fuel. And B.C.’s natural gas, liquefied and exported to emerging markets in Asia, holds great potential to provide a net environmental benefit globally by reducing the use of coal and oil.

China, for example, is seriously committed to reducing air pollution, contaminants and carbon dioxide emissions.

Part of their plan is to replace, where possible, the country’s coal and oil use with natural gas … and increase the amount of natural gas in their energy mix over time.

In today’s fast-moving and increasingly competitive environment, nothing is a forgone conclusion.

Indeed, a company sizing up a Final Investment Decision does so in the context of what is happening in British Columbia, but also what is happening globally. When you prepare to invest billions of dollars on an LNG project, you do so based on sound due diligence, foresight and strong understanding of the economics.

Building a strong business case ensures that the decision being made is the right one, and the right one for the long term.

The members of the B.C. LNG Alliance currently find themselves at a cross roads.

If we are going to have a viable LNG industry in B.C., our industry and all levels of government will have to make some difficult decisions. We must assess and adjust our sails to the competitive winds.

Our members must consider the full range of costs they will have to bear over the full life of their projects.

The B.C. LNG Alliance is concerned about our global competitiveness, and the overall fiscal framework in British Columbia and Canada.

Our members require certainty, clarity and a fiscal environment that recognizes the huge technical and financial challenges of very large and complex projects with significant risks.

We need certainty, clarity and a competitive fiscal framework that includes fair federal and provincial taxation.

The challenge is to get this right by striking a balance.

A balance that recognizes British Columbians deserve fair value for their natural resources.

A balance that recognizes that our industry operates in a highly competitive global market. A balance that offers certainty, stability and a reasonable rate of return on what will be historic levels of investment in B.C.

Again, British Columbians deserve to get fair value from their natural resources. And we agree with that. Our members are proud of the benefits that accrue from their industry.

But in light of the global market we operate in, B.C.’s overall cost structure holds the potential to reduce our members’ competitiveness and their ability to succeed in the global market.

We operate in a very fluid, fast-moving, cost-conscious global market. Our members want to ensure the overall cost structure we operate in is competitive with other jurisdictions, particularly those in the U.S. where they enjoy lower infrastructure costs.

U.S. LNG projects are very competitive. They are making use of existing infrastructure and brown field sites, while reengineering existing import facilities into new LNG export facilities.

Fundamentally, the LNG industry and our governments are on two parallel tracks heading in the same direction. These tracks need to come together.

The window of opportunity to sell B.C. LNG into the global market is closing. After 60 years of exporting our natural gas to the U.S., there is declining demand for our product.

 

Conclusion

I began by saying that a new LNG industry in British Columbia is not a foregone conclusion. If LNG is going to be a viable industry in B.C., each level of government must come together with our industry and make some difficult decisions.

We need to work together. We need to make tough decisions and get it right in order to cross the finish line, together.

These decisions won’t be easy, but they need to be made. Having said that, on behalf of my members, I can say with conviction that the B.C. LNG Alliance believes we can do this.

Our members are very keen to put down stakes in this province for a very long time. They want to invest in B.C. B.C.’s natural gas is a world class resource.

Our province has robust environmental protection, incredibly talented people, a great education and health care system and a stable political environment.

But we need to strike a balance. With LNG we have a rare opportunity to build a new industry that will benefit all British Columbians. An industry we can all be proud of.

Thank you.