Thank you for your kind introduction.
And a big thank-you, to the organizers of the Western Canada Pipe Trades Conference for inviting me to speak at your conference.
I am pleased to be with you this morning and look forward to today’s proceedings and discussions.
I have been to Calgary many times over the years and I always find the weather in March refreshing and invigorating.
This morning, 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 this morning on a positive note.
Yesterday when my flight landed in Kelowna I checked my email. I was pleasantly surprised to learn LNG Canada – one our proponents hoping to build a large LNG plant in Kitimat was granted both federal and provincial environmental approval. This is a huge milestone.
LNG Canada is the first project to be granted an environmental certificate under a single review process that meets both federal and B.C. requirements. The “substituted” environmental assessment is meant to eliminate duplication between federal and provincial processes.
LNG Canada partners – which includes Shell and companies from Japan, China and Korea are expected to make a final investment decision early next year.
LNG Canada expects 7,500 workers will be employed during peak construction and an estimated $8 billion will be spent on goods and services within Canada, including $3 billion in B.C.
Last week, another B.C. LNG player passed a major milestone.
Pacific NorthWest LNG, led by Malaysia’s Petronas, formally decided to move ahead with its project near Prince Rupert. It’s final investment decision will be decided after it obtains its federal environmental approval. It’s development agreement with the BC Government is expected to pass during a special summer session in the BC legislature next month.
Also, just a few months ago, Prime Minister Harper announced changes to the capital cost allowance rate for the LNG industry.
Specifically, the federal government intends to establish a 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 Canadian LNG industry.
This tax change will improve our competitive position globally and encourage the development of LNG in Canada.
Our members welcome this.
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, 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 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 more recently 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.
In that regard, we are working on various initiatives, including:
- Consulting with the Province on the implementation of the LNG tax regulations
- Working with our members to assess the potential impacts of pending Greenhouse Gas regulations
- And participating on the Premier’s LNG Working Group on skills training initiatives
The Alliance also engages with, listens to and addresses the concerns of First Nations, communities and stakeholders.
And we are actively engaged with all levels of government: local, provincial and federal.
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 any of you when I say that because our projects are in British Columbia, there are a few naysayers in the province.
Indeed, only a few months ago as British Columbians rang in the New Year, doomsayers, a few political pundits and others supposedly in the know, were declaring the death of BC’s nascent LNG industry.
Falling energy prices have inspired critics to play into those fears.
As Communications Director for 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 paraphrase Mark Twain, reports of BC’s LNG death have been greatly exaggerated!
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-Financial 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, Port Edward, and in Squamish.
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.
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, the upgrade of BC Place, and the Bennett bridge right here in Kelowna.
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 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 line, and win.
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.
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 a 100 to 120 million-ton LNG deficit globally by 2030.
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, 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.
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.
For example, Chevron Canada recently reached an agreement with a First Nation band in northwest BC.
This agreement ensures that the 16 First Nations whose traditional territory is located along the proposed route of the Pacific Trail Pipeline in northern BC are now part of a commercial partnership — a partnership that will provide lasting benefits to the member First Nations.
As well, Pacific Northwest LNG recently signed impact benefit agreements with local First Nations in and around Prince Rupert.
These agreements will help provide significant economic and social benefits to the signatories.
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, 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.
For example, in the case of Alberta, there is an opportunity to supply some of the natural gas needed by the LNG industry downstream in BC.
That means jobs and revenues for Alberta.
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 3,000 to 4,000 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.
Support from the industry could come from across the country from various manufacturers to service providers, all of whom could benefit from the development of BC’s LNG industry.
And on top of that are the jobs created to build and operate the natural gas production facilities in northeast BC or 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, 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 in the areas of GHGs.
For example, the regulations still need to be done and they need to be done right.
As well, we want to ensure that offset markets are broader than just BC to provide companies with the required flexibility.
We also need to see continued progress in addressing labour issues, specifically training and access to workers.
We remain hopeful that by working with the provincial government and others, progress in these areas will occur just at it has on the fiscal side of the equation.
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 morning 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 announcement earlier this year, 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 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.