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Comment: Competitiveness first priority for LNG industry

British Columbia’s emerging natural-gas export industry is at a critical juncture. We are working to secure a future where B.C.

British Columbia’s emerging natural-gas export industry is at a critical juncture.

We are working to secure a future where B.C. becomes a supplier of cleaner-burning liquefied natural gas to the global market, and where British Columbians realize the resulting significant economic and social benefits.

However, global LNG markets are highly competitive. While B.C. has extensive natural-gas resources and ocean access, the province’s LNG industry must compete against other well-established international suppliers, such as Australia, to secure long-term contracts and the billions of dollars in investment needed to make the vision of a world-class natural-gas-export industry a reality.

Several elements are needed to ensure the future success of B.C.’s LNG export industry and of the natural-gas industry as a whole. These elements will together determine the industry’s competitiveness and whether this opportunity is realized for the benefit of B.C.

Competitiveness means assuring the right elements — the regulatory framework, policies, taxes, royalties and skilled labour — are in place to attract the investment dollars needed to build LNG export terminals and to continue the growth of natural-gas production in northeastern B.C. required to support these facilities over the longer term.

Natural-gas investments in B.C. are significant. By the end of this year, the oil and gas industry will have invested an estimated $27 billion in the province since 2009. Planned liquefaction facilities alone are each a multibillion-dollar investment.

However, none of this investment and the resulting jobs, contracts and government revenues is guaranteed. Companies and investors require a level playing field that allows Canada’s natural-gas sector to compete fairly with other investment opportunities in Canada and with other countries also seeking to supply natural gas to growing energy markets in Japan, China and South Korea.

The fiscal regime, which includes the taxes and royalties oil and gas companies pay to all levels of government, is fundamental to the competitiveness equation. Investment in LNG facilities is a discrete investment decision, and the federal and provincial tax treatment for these facilities must be competitive both with similar facilities in Canada and with those in other jurisdictions. Benefits will accrue to British Columbians only if these LNG projects go forward, which is not a certainty at this stage.

Despite assertions by some to the contrary, robust environmental regulations remain in effect in B.C. They ensure communities and fresh water near natural-gas well sites remain safe and that the environment is protected. Regulatory frameworks based on sound science provide clarity and deliver responsible environmental outcomes. Regulatory processes that minimize unnecessary duplication and overlap — that are predictable, stable and enable timely decision-making — improve competitiveness and help to attract the required investment capital.

B.C.’s fledgling LNG industry will require increasing amounts of electricity. Industry is seeking cost-competitive solutions to its electricity needs, solutions that can deliver power on a timeline aligned with the pace of LNG development. It is important to have a mix of power generation sources in the province that balances ratepayer interests, keeps B.C. competitive and achieves environmental objectives.

Finally, the upstream natural-gas industry must continue to earn and maintain its social licence to ensure the long-term success of our industry. This means we must consistently demonstrate we are producing natural gas responsibly and safely. Our operating practices for hydraulic fracturing, which demonstrate the Canadian Association of Petroleum Producers’ member companies’ support for responsible water management and use, are an important step in this regard.

The benefits of a natural-gas-export industry, enabled by a competitive environment, include increased tax revenue, economic growth and job creation. A calculation based on a 2012 report by the Canadian Energy Research Institute shows the proposed LNG facilities in B.C. would generate about $150 billion in taxes and $500 billion in GDP growth across Canada over the next 25 years. CERI also estimates the natural-gas industry would directly employ 40,000 people in B.C. by 2035, up from the 12,000 people it currently employs.

This is a tremendous potential economic opportunity. To realize this opportunity in an increasingly competitive global market, we must act collaboratively and with a sense of urgency to advance LNG export projects and the supporting upstream natural-gas development.

Dave Collyer is president of the Canadian Association of Petroleum Producers.