Thank you for that kind introduction XXXXX.
And thank you to the Juan de Fuca Orthopaedic Conference for inviting me to speak tonight.
Before I begin, however I would also like to thank the Coast Salish people for allowing me to enter onto their traditional territory.
The title of my speech references “Energizing the Energy Markets” and if the LNG industry is successful in British Columba; this is exactly what we will do!
However, what I intend to talk to you about this evening is much broader than that.
Tonight, I’d like to give you some fresh insight on the present state of LNG in BC, particularly against the backdrop of current oil and energy prices.
I want to talk with you about the LNG opportunity in British Columbia, and why from my perspective, LNG is not an “if” but a “when”…
… and also why LNG is a nation building opportunity with benefits that go well beyond British Columbia to include the entire country.
Lastly, while the BC government has taken positive steps to lay the foundation for the LNG industry in BC, I’ll provide some details on what else the government needs to do to help bring the industry to fruition.
Having said that, I’d like to begin my remarks tonight on a positive note.
A little more than a month ago Prime Minister Harper announced changes to the capital cost allowance rate for the LNG industry.
Specifically, the federal government intends to establish an accelerated capital cost allowance rate of 30 per cent for equipment used in natural gas liquefaction and 10 per cent for buildings at LNG facilities.
This is very good news for the LNG industry.
This tax change will improve our competitive position globally and encourage the development of LNG in Canada.
One thing I want to be very clear about, is that this is not a tax break nor is it corporate welfare. To be clear, the industry’s tax liability does not change. What changes is the speed with which the industry is allowed to recoup its capital investment.
We’re pleased the federal government has recognized, and is supporting, the economic potential of our industry.
This new tax measure will support the growth of BC’s LNG industry … which in essence is what the BC LNG Alliance is all about … so let me take a few moments to tell you who we are and what we do.
The BC LNG Alliance came together to serve as the common voice for British Columbia’s leading LNG project proponents.
Our mandate is clear: foster the growth of a safe, environmentally and socially responsible LNG industry in BC …
… An industry that will provide thousands of jobs to British Columbians and Canadians for generations to come.
For this to happen however, we must develop an industry that is globally competitive.
When the Alliance was created, we started with four members.
Today we have seven. They include:
- Kitimat LNG (Chevron Canada and Woodside Energy)
- LNG Canada (Shell Canada, PetroChina, KOGAS and Mitsubishi Corporation)
- Pacific NorthWest LNG (Petronas, JAPEX, Indian Oil Corporation, Sinopec and PetroleumBrunei)
- Prince Rupert LNG (BG Group)
- DC LNG (AltaGas and Idemitsu Canada)
- Woodfibre LNG (Pacific Oil and Gas)
- And ExxonMobil, who joined the Alliance late last year.
The fact that we have grown so quickly and have members who are leading players in the energy industry is a strong vote of confidence in the Alliance.
More importantly it is a vote of confidence in British Columbia and the fundamentals that are at the core of the province’s LNG sector.
All told, these LNG industry leaders bring decades of experience, insight and best practices to British Columbia.
Part of our role at the Alliance is 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 also engages with, listens to and addresses the concerns of First Nations, communities and stakeholders.
Our mandate is clear, comprehensive and important, especially when one considers that the projects proposed by our members would be the largest investments ever seen in BC … and among the largest ever seen in Canada.
However, it won’t surprise you when I say there are a few naysayers in the province.
Indeed, the doomsayers, a few political pundits and others supposedly in the know, have been declaring the death of BC’s nascent LNG industry.
Falling energy prices have inspired critics to play into those fears.
As President of the BC LNG Alliance, I can tell you without hesitation that these critics rush to judgement too quickly, based on false assumptions and a lack of knowledge about BC’s LNG industry.
To the contrary, we are not alarmed by the present volatility in the energy market.
From our perspective, the volatility masks a tremendous opportunity for LNG in British Columbia. This is due to the fact that the fundamentals in British Columbia are solid.
The province is well-positioned for LNG growth.
That’s why companies have already made considerable investments as part of their pre-Final Investment Decision work.
Residents of northern BC have already witnessed a significant amount of that investment…
… Investment valued in the tens of millions of dollars.
These investments have created jobs and spinoffs in northwestern BC for First Nations communities and for the communities of Prince Rupert, Terrace, Kitimat, and Port Edward.
As well as in Squamish, a community 45 minutes north of Vancouver.
I want to ensure that all of you understand the magnitude and scope of the LNG industry.
The projects that make up the Alliance together represent a total potential investment that will run in the tens of billions of dollars, just for the plants.
Each of the larger BC LNG projects would, on a standalone basis, represent some of the largest present-day infrastructure projects in Canada, on par with the oil sands, and surpassing projects such as:
- The $6.5-billion Romaine Hydroelectric Complex in Havre-Saint-Pierre, Quebec
- The $4.9-billion Eglinton Crosstown LRT in Toronto
- Or the $6.2-billion Kee-ask Hydroelectric Project on the Lower Nelson River in Manitoba
Given the size and scope of the proposed projects, LNG proponents will make investment decisions on a longer-term pricing horizon.
A pricing horizon that goes well beyond any impact that the spot price of crude oil may have.
LNG projects are large, complex 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 are working toward that goal through diligent management that ensures projects are properly sited, designed, and constructed.
From financing, to engineering, to skills training, there are many moving parts when it comes to building a new LNG industry.
It’s a multifaceted endeavour requiring cooperation on many fronts among federal, provincial, First Nations, and municipal governments, as well as labour and educational institutions.
We know that our competitors know this and that is why we are working to get it right because our competition is global.
From Australia, to the U.S. gulf coast, to East Africa and to Russia … the race is on to serve the Asian market.
We are in the race, but we also know there is short-term potential that LNG supply may out-pace demand.
In BC, we are not looking at LNG as a short-term 100-metre sprint, but as a long-term race; a marathon of sorts, where we are strongly positioned to cross the finish line, and win.
Keep in mind that over the longer-term, Asia’s economies will continue to grow dramatically over the next half century and our members are well aware of that.
In fact, when comparing supply to demand – there will be about a 120 million ton global LNG supply gap by 2025.
This means two things:
First, BC’s LNG industry may not meet the FID targets put in place by those who focus on federal and provincial political cycles.
Second, however, it does mean that over the longer-term, the industry is well positioned for growth in British Columbia.
Furthermore, it is important to remember that British Columbia has some great advantages relative to that of our competitors.
For example, BC’s natural gas is a world class resource that is easily accessible.
Our natural gas pipelines are built to the highest standards and have been safely transporting natural gas for over 60 years.
There is a track record of safety and success that few can match.
Another advantage relates to the ambient air temperature at an LNG plant on British Columbia’s north coast, which has a significant impact on the efficiency of the plant.
Communities in northwestern BC, where many of the proposed LNG plants would be built, are a long ways from the equator.
This means that it requires much less energy to produce the same quantity of LNG in northern BC than it does in locations that are close to the equator.
This translates into an increase in production capacity of about 25%.
At the same time, British Columbia is strategically located with convenient access to the markets of the Asia Pacific.
This ensures that we can get our product to markets quicker, which gives us an advantage relative to that of our competitors in areas like the U.S. gulf coast.
On top of that, British Columbia like all Canadian provinces, has robust environmental standards.
The province has incredibly talented people, great education and health care systems and a stable political environment.
And of significant importance is the fact that the BC government is very supportive of LNG as an industry and as a cornerstone of the province’s economic future.
Working with the BC government, educational institutions, organized labour and First Nations, the LNG industry is part of a working group which has set out a series of recommendations.
Recommendations that serve as a road map to ensure British Columbia has the skilled labour force it needs to seize the LNG opportunity.
It’s also important to note that individual LNG proponents continue to make progress towards agreements with First Nations.
…All of which is being done with a view to shepherding projects towards Final Investment Decisions.
As I stated at the outset, with the planning work underway and the companies moving towards FID, many communities and First Nations are seeing the benefits associated with LNG investment.
Once companies reach FID, those benefits will be felt across the province, across western Canada and across the entire country.
The investments made by our members, and the jobs and spin offs they would create, will have a very positive and beneficial effect on the BC and Canadian economies.
And in BC, LNG holds the potential to create tens of thousands of new construction jobs and thousands of new permanent jobs.
Many of those jobs will go to British Columbians, and others will be filled by Canadians from across the country.
For example, on average there will be about 3,500 to 7,500 construction workers required for each of the large scale LNG plants.
That number doesn’t include the thousands of long-term jobs required to operate the plants and support the industry.
And on top of that are the jobs created to build and operate the natural gas production facilities in northeast BC and the pipelines to get the gas to the coast.
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.
Against this background, LNG offers a rare opportunity to build a new industry that will benefit British Columbians and all Canadians for decades to come.
Given this potential it is critical that the LNG industry, along with all levels of government, ensure there are policies that will enable our industry to reach its full potential.
To that end, we acknowledge the efforts made by the BC government to help create a positive investment climate, which includes revisiting the original LNG tax structure.
This was not an easy undertaking, but the government worked hard to get it done and we applaud them for that.
We also applaud their efforts to create a thorough and efficient regulatory review process.
Moreover, the BC government is to be congratulated for its work on international trade missions to promote BC’s LNG opportunity.
However, more needs to be done!!
For example, the regulations implementing the LNG Tax and the GHG legislation still need to be written and they need to be written carefully and correctly.
As well, we want to ensure that any carbon offset market is broader than just BC; this will provide companies with flexibility and help lower cost.
We also need to see continued progress in addressing labour issues, specifically training and access to workers, including First Nations.
We remain hopeful that by working with the provincial government and others, progress in these areas will occur.
There are many reasons for getting LNG right and we are well on our way.
By getting it right, we can ensure we remain competitive.
By getting it right, we can successfully compete over the longer term for a piece of the LNG market along with the US Australia, East Africa and Russia.
By getting it right, we can ensure BC’s LNG industry will have a bright future.
I’ve tried to touch upon various items here this evening in order to give you a realistic assessment of British Columbia’s LNG sector.
Based on my knowledge and involvement with the sector, I believe we have a promising long-term future.
Prime Minister Harper’s recent announcement, which I touched upon at the outset of my remarks, is reflective of the long-term future of this industry.
LNG in BC is not an “if” but a “when”.
I expect that future will start to become even clearer through the course of 2015 as some companies move towards their Final Investment Decisions.
Based on my read of the situation, I believe we may very well see a Final Investment Decision made this year.
As I said at the outset, we have a rare opportunity to build a new industry for the benefit of British Columbia and Canada.
Fundamentally what we are talking about is an opportunity for nation building.
The growth of this new sector will be welcome news for all of us involved with LNG … and indeed for all Canadians.
I’m pleased to have had the opportunity to join you today.