Even before British Columbians rang in the new-year, doomsayers were already 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 am here to say the critics speak too soon. Present energy market volatility masks a tremendous LNG opportunity in British Columbia.
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 Edward, and Squamish. The projects proposed by BC LNG Alliance members represent the largest private sector investment in our province’s history. If just one of the larger proposed LNG projects move forward, it will cost more than the combined investment in the new Port Mann Bridge, the Canada Skytrain line, the new Vancouver convention center, and the upgrade of BC Place.
While there is great emphasis placed on the spot price of crude oil, proponents will 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.
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, as well as labour and educational institutions.
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 will enable our industry to reach its 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 in British Columbia is globally competitive – we are still not there.
However, we acknowledge the effort made by both the federal and provincial governments in the work they are doing to help create a positive investment climate, which includes revisiting its original tax structure, the creation of a thorough and efficient regulatory review process, international trade missions to promote BC’s LNG opportunity, the creation of the Premier’s LNG Working Group that is focused on skills development and training, as well as the work they are doing to address First Nations skills and capacity building.
British Columbia has a world-class natural gas resource base, close proximity to the large Asian markets, robust environmental protection, incredibly talented people, a great educational and health care system and a stable political environment.
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 Energy, PetroChina, KOGAS and Mitsubishi Corporation); Pacific NorthWest LNG (PETRONAS, JAPEX, Indian Oil Corporation, Sinopec and PetroleumBRUNEI); Prince Rupert LNG (BG Canada); Triton LNG (AltaGas and Idemitsu Canada) Woodfibre LNG (Pacific Oil and Gas) and ExxonMobil.
The Alliance’s mandate is simple, it is to foster the growth of a safe, environmentally and socially responsible LNG industry in British Columbia, one that will provide thousands of jobs to British Columbians for generations to come. But, for this to happen we also must develop an industry that is globally competitive.
BC LNG Alliance