LNG export terminals vital for B.C. gas producers

Contributed to Victoria Times Colonist
Brad Herald
Vice President of Western Canada and Natural Gas Markets
Canadian Association of Petroleum Producers
March 23, 2016

Job losses in northeastern British Columbia are climbing steadily as the region’s natural gas industry continues to be challenged by low prices and eroding markets in Canada and the United States.

Statistics Canada reported this month that unemployment in northeastern B.C. has risen to 9.2 per cent, well above the provincial average of 6.8 per cent and the national average of 7.3 per cent.

With this number in mind, our industry welcomed the recent conditional federal environmental approval of the Woodfibre LNG project, one of about 20 liquefied natural gas projects proposed for B.C.’s West Coast. Ottawa’s decision shows the federal government recognizes the importance of the West Coast LNG industry to western Canadian natural gas producers and the communities that depend on it for their economic well-being.

Last year, investment in B.C.’s upstream natural gas industry declined 50 per cent compared to 2014. The total number of wells drilled in the province has declined by nearly 17 per cent over the same period. That’s the result of persistently low natural gas prices and a steady decline of the traditional markets for western Canadian gas in Central Canada and the U.S.

In fact, the U.S., our No. 1 customer for natural gas, is now our No. 1 competitor. National Energy Board data shows that total exports of Canadian natural gas to the U.S. declined by nearly one third between 2007 and 2014. This trend will likely continue as the U.S., because of its own abundance of natural gas, is expected to become a natural gas net exporter by next year.

By contrast, world demand for natural gas is expected to increase 46 per cent by 2040, driven primarily by the rapidly expanding Asian economies, according the International Energy Agency.

This is why West Coast LNG export terminals are so critically important to the future of B.C.’s natural gas producers, and the economic benefits and government revenues resulting from natural gas production: given declining demand for western Canadian natural gas in North America, our industry needs to access new markets in countries where demand is growing in order to remain economically viable. B.C. and Canada will be better off as a result.

Even a modest West Coast LNG industry, exporting about 30 million tonnes per year, would grow Canada’s economy by an average of $7.4 billion per year over the next 30 years, according to a Conference Board of Canada study. Of that total, $5.3 billion would accrue in B.C. The increased economic activity from natural gas development and exports would increase national employment by an annual average of 65,000 jobs, including more than 46,000 jobs in B.C., the study says. This increased international trade would also generate substantial new government revenues through royalties, taxes and land tenure payments.

That’s the economic rationale for establishing a West Coast LNG industry. The global environmental benefits from exporting natural gas to countries that rely on coal to help meet their primary energy demand, such as China, are also significant.

Natural gas is the cleanest-burning fossil fuel. Used in power generation, it emits about half the carbon dioxide compared to coal. It also emits far fewer air pollutants and can significantly reduce smog when used instead of coal to generate electricity.

An LNG industry is an opportunity for B.C. producers to export natural gas to overseas markets, and in doing so we can help fuel cleaner power generations in countries that rely on coal. Making more Canadian natural gas available to China will lower the amount of carbon in its energy mix. This would be a positive Canadian contribution to address global climate change.

We are firmly of the view that the economic benefits from responsible natural gas production and export can be achieved while also meeting the provincial and federal government’s ambitions to tackle global climate change.

The fact is that the world will consume increasing volumes of natural gas for decades to come. B.C. and Canada are recognized leaders in environmentally responsible natural gas development. That is why Canada can and should be the supplier of choice of responsibly produced natural gas.

And in doing so, we will be able to put British Columbians and people elsewhere in Canada back to work.