A lot has been made of the cancellation of two major LNG projects in recent months: Pacific NorthWest LNG and Aurora LNG. And rightly so—these were major projects representing significant investments. They would have been a generational opportunity in terms of jobs, spin-off economic growth and an increased taxation base for governments that could help fund social programs.
But for those who are worried this is the end of the B.C. LNG dream, think again. We’re only in Act III, and there’s still time to change the ending from tragedy to triumph—provided we get the next few scenes right.
The fact is, there are still multiple players and projects interested in B.C. LNG. This includes the LNG Canada project, a partnership between Shell, PetroChina, Korea Gas and Mitsubishi that would export 24 million metric tonnes of LNG a year. Recently, LNG Canada CEO Andy Calitz expressed his optimism that this project will move forward.
There’s also Kitimat LNG with partners Chevron Canada and Woodside Energy International that would export 10 million metric tonnes per year; and Woodfibre LNG which last year became the first project to commit to an investment decision. In total, there remain 17 proposed LNG export projects that remain at various stages of review and consideration, according to the B.C. government.
Should these projects go forward, we are still talking about a significant impact on jobs and investment that could be an engine of growth for the province for decades. Perhaps not quite the bonanza that was envisioned when the B.C. government launched its LNG strategy just five years ago (and there’s a lesson to be learned in that), but an economic difference-maker to the people of B.C. certainly.
In some respects, the timing is good. The fundamentals remain in place for strong and growing global natural gas demand.
In fact, the recently released 2017 World Energy Outlook by the International Energy Agency forecasts natural gas demand in China alone will rise from 20.4 billion cubic feet per day (Bcf/d) in 2016 to 59.2 Bcf/d by 2040. To put that in perspective, Canada’s entire natural gas production output in 2016 to meet both domestic and U.S. demand (the U.S. being currently our one-and-only export market) was 15.2 Bcf/d.
China has indicated a clear desire to diversify its supply sources and to use natural gas as a way of weaning itself off coal, which produces smog, and twice as many GHG emissions when burned to generate electricity.
And that’s just one potential market. The IEA report anticipates significantly increasing energy demand throughout Southeast Asia and India due to increasing population and a rising middle class.
These markets in Asia still recognize Canada’s significant advantages, including a vast supply of untapped natural gas resources—much of it located in British Columbia—and a relatively short sail away from the West Coast across the Pacific Ocean. It’s known that operators in northeastern B.C. have been producing natural gas safely and reliably for decades, and that our producers are leaders in developing our resources in a safe and sustainable manner.
However, if our LNG projects are to move forward, the one thing we must avoid is complacency. We must recognize that the LNG market is a competitive one. Australia and Qatar already have thriving LNG export industries, and the United States is ramping up with new facilities along the Gulf Coast.
We must learn a key lesson from what happened with Pacific NorthWest and Aurora LNG: That we need to compete.
Canadian natural gas producers have demonstrated that they can operate competitively, even in a low-price environment, and even while adhering to strong regulatory and environmental standards. As an example, the industry recently released a $700 million plan that will allow it to meet a commitment to reduce methane emissions by 40 to 45 percent by 2025.
But what industry cannot withstand is regulatory uncertainty that drives away investment, and policies that render major energy infrastructure projects uncompetitive due to unnecessarily high costs and lengthy delays.
In my role as B.C. Chamber president and CEO, I have the privilege and the responsibility to represent British Columbia businesses and economic interests both here and abroad. When I travel and interact with investors, members and trading partners, I can tell you that B.C. and Canada remain highly respected due to our ethical standards and rule of law. But there is concern we are perhaps turning into a jurisdiction where it’s difficult to do business. We must keep our focus on streamlined, predictable regulatory processes and avoid the pitfalls of delays due to political factors. If a perception takes hold that we can’t get projects done in B.C. and Canada, investment will dry up and job losses and economic stagnation will follow.
It’s not too late to change that perception. Let’s ensure that we have competitive regulatory review timelines and policies that maintain our trademark high environmental standards, but that do so efficiently and effectively. Let’s also remember that taxation revenues expand under fiscal policies that encourage long-term growth and investment, not short-sighted revenue grabs.
Business leaders charged with multi-billion dollar capital investment decisions look at a multitude of factors, but one thing that never sits well on any balance sheet is uncertainty. So let’s be clear-eyed and constant: let’s send a strong signal that we support a robust oil and natural gas industry and a progressive business development climate in B.C.
The new NDP-led government in B.C. has undertaken a LNG competitiveness review. The government has said that it supports the creation of a B.C. LNG industry. I am hopeful that the government takes the opportunity to recognize the importance of the province’s natural gas industry, and the potential for expanded market access through LNG exports to transform our province for a generation. If we get this right, it could mean jobs and economic spinoffs that would positively impact every community and every region of our great province.
It’s not too late for B.C. LNG. But only if together we make it so.