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REPORT FEBRUARY 2016
A Changing Tide.British Columbia’s Emerging Liquefied Natural Gas Industry
A Changing Tide: British Columbia’s Emerging Liquefied Natural Gas Industry Allison Robins, Prince Owusu, Dan Munro, and Len Coad
preface
There are currently 21 proposed liquefied natural gas (LNG) facilities vying to be a part of a future LNG industry in British Columbia. The objective of this report is to quantify the economic and labour market impacts associated with a 30 million tonnes per annum (MTPA) LNG industry in the province. An LNG industry in B.C. would create new markets for Canada’s natural gas, generating income and jobs for governments and citizens. The findings in this report, however, are subject to uncertainty, as none of the proposed projects have entered the construction phase, with many still attempting to obtain required government and investor approval.
To cite this report: Robins, Allison, prince Owusu, Dan Munro, and Len Coad. A Changing Tide: British Columbia’s Emerging LNG Industry. Ottawa: The Conference Board of Canada, 2016.
©2016 The Conference Board of Canada* published in Canada | All rights reserved | Agreement No. 40063028 | *Incorporated as AERIC Inc.
An accessible version of this document for the visually impaired is available upon request. Accessibility Officer, The Conference Board of Canada Tel.: 613-526-3280 or 1-866-711-2262 E-mail: [email protected]
®The Conference Board of Canada and the torch logo are registered trademarks of The Conference Board, Inc. Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice. The findings and conclusions of this report do not necessarily reflect the views of the external reviewers, advisors, or investors. Any errors or omissions in fact or interpretation remain the sole responsibility of The Conference Board of Canada.
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CONTENTS
i EXECUTIVE SUMMARY
Chapter 1 1 LNG Industry Overview 2 The Global Context 3 British Columbia’s Emerging LNG Sector
Chapter 2 6 LNG Industry Investments 8 Liquefaction Terminals 8 LNG Support Activities
Chapter 3 21 Economic Impacts 22 Key Assumptions and Methodology 26 Economic Impact Results 30 Implications of Possible Expansion 32 Economic Impact Summary
Chapter 4 33 Labour Impacts 34 Employment, Unemployment, and Labour Market Participation 36 Lagging Population Growth and Rising Retirements 37 Slow Labour Force Growth and Rising Labour Needs 38 High-Demand Occupations 39 A Challenging Labour Market for LNG Development 43 Opportunities, Challenges, and Strategies
Chapter 5 49 Conclusions
Appendix A 53 Bibliography
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AcknowledgementsThe authors of this report would like to gratefully acknowledge Progress Energy Canada Ltd. for the funding that it provided, which made this report possible. We would also like to extend our sincere thanks to the external reviewers, who wish to remain anonymous, for providing insightful feedback on earlier drafts of this report. Notwithstanding these contributions, the analysis and conclusions of this report are those of The Conference Board of Canada. Any errors or omissions that remain are those of the Conference Board.
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EXECUTIVE SUMMARY
A Changing Tide: Canada’s Emerging Liquefied Natural Gas Industry
At a Glance
• This report quantifies the impact of a 30 million tonnes per annum LNG industry in British Columbia.
• Between 2015 and 2045, total annual spending would average $7 billion per year.
• Canada’s economy would grow by an average of $7.4 billion per year, with $5.3 billion in growth taking place in British Columbia.
• An increase in economic activity would increase national employment by an average of 65,000 jobs, with 46,800 occurring in British Columbia.
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A ChANGING TIDEBritish Columbia’s Emerging Liquefied Natural Gas Industry
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The projects that could form British Columbia’s future liquefied natural gas (LNG) industry are currently at various stages in obtaining required government and investor approval. At this time, there are 21 proposed LNG projects in B.C., which are the largest private sector investments to occur in the province. The objective of this report is to quantify the potential economic and labour market impacts associated with a 30 million tonnes per annum (MTPA) LNG industry in British Columbia.1 The development of this size of industry would result in the production of an additional 5 billion cubic feet per day (bcf/d) of natural gas, approximately doubling 2014 production levels.
For the purposes of this report, BC’s future LNG industry consists of
three hypothetical projects that come into service between 2021 and
2025. These projects consist of two larger-scale projects that include
two liquefaction trains with a capacity of approximately 6 MTpA each
and one smaller-scale project that includes a single train with a capacity
of 5 to 6 MTpA. The capacity of the reference case projects are
representative of currently proposed LNG projects in British Columbia.
As a sensitivity case, the report also considers an additional 23 MTpA
of expansion capacity, which could occur if market and regulatory
conditions were conducive to additional development.
The development of an industry of this size requires a significant level
of investment. (see Table 1.) This report finds that the majority of
investment spending would occur in the upstream sector of the natural
gas value chain, to produce a sufficient quantity of natural gas to supply
liquefaction terminals with feedstock and fuel. Compared with initial
1 One tonne of LNG is approximately equal to 1.38 million cubic metres, or 51.4 petaJoules of natural gas.
The development of an industry of this size requires a significant level of investment.
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investment requirements, expansion investment requirements (excluding
upstream investments) are significantly lower. Much of the existing
infrastructure would not need to be replicated; increasing capacity would
involve either adding additional trains to existing liquefaction terminals or
adding compressor stations to natural gas pipelines.
Table 1Investment Totals(2015 C$ millions)
2016–20 2021–25 2026–30 2031–25 2036–40 2041–45 2046–50 2051–55
Upstream
Wells 17,623 21,521 18,669 18,214 18,163 18,156 18,155 18,155
Gathering 8,812 3,228 2,800 2,732 2,724 2,723 2,723 2,723
Initial total 26,435 24,749 21,469 20,946 20,887 20,879 20,878 20,878
Wells – 10,374 17,245 15,153 14,225 14,674 14,667 14,667
Gathering – 5,187 8,623 7,576 7,363 7,337 7,334 7,333
Expansion total – 15,561 25,868 22,729 21,588 22,011 22,001 22,000
Midstream
Initial total 3,602 2,201 – – – – – –
Expansion total – 2,400 2,200 – – – – –
Transmission
Onshore pipelines 6,094 1,607 – – – – – –
Offshore pipelines 937 – – – – – – –
Compressor stations 541 269 – – – – – –
Initial total 7,572 1,876 – – – – – –
Expansion total – 1,488 539 – – – – –
Liquefaction terminals
Initial total 27,559 5,668 – – – – – –
Expansion total – 9,761 8,014 – – – – –
Grand total (excluding expansions) 65,168 34,494 21,469 20,946 20,887 20,879 20,878 20,878
Expansion total (including expansions) 65,168 63,704 58,090 43,675 42,475 42,890 42,879 42,878
Source: The Conference Board of Canada.
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These expenditures will have a multiplier effect on B.C. and Canada’s
economies. (see Table 2.) This report expects that total annual spending
across the upstream, midstream, and downstream sectors will average
$7 billion. Over the next 30 years, these investments would increase
real Canadian GDp by an average of $7.4 billion per year, of which
$5.3 billion would occur in British Columbia.
This increase in economic activity would also have significant
employment impacts; on a national level, employment would increase
by an average of 65,000 jobs, 46,800 of which would occur in British
Columbia. (see Table 2.) The bulk of these jobs would materialize in the
construction, manufacturing, and resource sectors. Induced economic
impacts, such as increased household spending, would also create
employment opportunities in the wholesale and retail trade industry. The
employment opportunities resulting from an LNG industry in B.C. would
decrease the province’s unemployment rate by 0.5 percentage points.
In terms of the fiscal impacts of a B.C. LNG industry, an increase in
labour income and corporate profits would result in additional provincial
and federal personal and corporate income tax revenues. Indirect taxes
would contribute $808 million and $577 million in revenue annually to the
B.C. provincial government and federal government, respectively. Finally,
Table 2Annual Economic Impact of a 30 MTPA LNG Industry
Upstream Transmission Midstream LNG terminal Total
Canada
GDp at market prices (2015 C$ millions) 4,663 335 551 1,751 7,385
Employment (000s) 43 3 5 14 65
B.C.
GDp at market prices (2015 C$ millions) 3,720 232 285 1,080 5,281
Employment (000s) 34 2 3 9 47
Source: The Conference Board of Canada.
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B.C.’s LNG tax would result in an additional $208 million in revenue
and increased drilling activity would result in an additional $686 million
in royalty payments to B.C.’s provincial government over the lifetime
of the projects.2 In total, between 2016 and 2045, a B.C. LNG industry
would boost average annual revenues for the provincial and federal
governments by $3 and $3.2 billion, respectively. (see Table 3.)
In developing an LNG industry, in addition to significant benefits, there
are challenges with which stakeholders will need to contend. proposed
LNG projects are located in small, isolated communities, whose working
populations are often not sufficient to fully staff a project or which may
lack necessary skill sets. Aboriginal residents, a population that often
exhibits lower labour market participation than non-Aboriginal residents,
could fill these jobs. To effectively engage with these communities,
however, governments and firms will need to develop strategies to
mobilize and train these individuals. Governments and firms will
2 Assuming that the feedstock for these LNG facilities is sourced in British Columbia.
Table 3Annual Fiscal Impact of a 30 MTPA LNG Industry(millions of current $)
Upstream Transmission Midstream LNG terminal Total
B.C. corporate income tax 113 9 13 77 211
Federal corporate income tax 289 22 33 197 537
B.C. personal income tax 786 47 65 206 1,096
Federal personal income tax 1,478 89 123 386 2,060
B.C. indirect taxes 595 45 77 100 808
Federal indirect taxes 425 32 55 72 577
B.C. royalty revenue 686 – – – 686
B.C. LNG tax revenue – – – 208 208
Source: The Conference Board of Canada.
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also need to dedicate time and attention toward supporting intra and
interprovincial migration, and ensuring that workers are set up for
success in post-LNG employment opportunities.
The findings in this report are subject to a great degree of uncertainty,
given that none of the proposed projects have progressed to the
construction stage. What is certain, however, is that in recent years,
Canada’s net natural gas export volumes to the United states has
declined and the North American market remains constrained on
demand. A future LNG industry would create new markets for Canada’s
natural gas, which would generate revenues and employment
opportunities that would not otherwise exist.
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CHAPTER 1
LNG Industry Overview
Chapter summary
• Global liquefied natural gas (LNG) trade has continued to grow, reaching record volumes in 2014.
• Approximately 80 per cent of additional planned capacity is located in North America, driven by the rapid development of shale gas plays.
• Natural gas supplies in B.C. currently exceed demand in available pipeline markets.
• There are currently 21 proposed LNG facilities in B.C. that are at various stages in obtaining required government and investment approval.
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The Global Context
Natural gas liquefaction technology has been in use globally for more than 50 years. As natural gas changes from gas to liquid, it shrinks volumetrically by a factor of almost 600, making it economical to ship large volumes over great distances. This allows for the development of “stranded” natural gas resources that otherwise would not have market, providing a source of income and employment to the producing jurisdiction.
In 2014, the global LNG supply chain handled near-record volumes.1
Global LNG trade reached 241.1 million tonnes per annum (MTpA) in
2014, with import prices in Japan averaging $15.6 million British Thermal
Units (MMBtu).2 Of the total, 64.7 MTpA (27 per cent) were delivered
under spot contracts and the remainder under long-term contracts.
Liquefaction capacity has been growing modestly since 2011, reaching
301 MTpA in 2014. Regasification capacity totalled 724 MTpA in 2014,
indicating substantial flexibility in the overall supply chain. Current
plans include a total of 750 MTpA of additional liquefaction capacity, of
which 80 per cent would be located in North America. Although not all
of this capacity will be constructed, the expectation is that the industry
will continue to expand. Much of the projected growth in LNG capacity
has resulted from development of Australia’s natural gas resources, the
prolific growth of shale gas in North America, and potential development
of deepwater natural gas offshore of Africa.
1 All data for global LNG are taken from International Gas Union, World LNG Report—2015 Edition.
2 The average spot price of LNG imported to Japan averaged $7.5/MMBtu in November 2015.
In 2014, the global LNG supply chain handled near-record volumes.
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Although the current global crude oil price downturn has cast a shadow
over LNG markets (with LNG typically priced relative to crude oil), the
outlook remains positive. Continued growth of energy demand in Asia,
particularly mainland China, has generated a competitive race to market,
based on long-term fundamentals; by 2035, Asian import requirements
are expected to increase by approximately 33 billion cubic feet per day
(bcf/d), with over half of this growth occurring in China.3
British Columbia’s Emerging LNG Sector
B.C. has been an active participant in the development of North
America’s unconventional gas industry.4 At the end of 2013, remaining
natural gas reserves stood at 1,197.2 billion cubic metres (bcm), or
42.3 trillion cubic feet (tcf).5,6 Growing reserves in the Montney formation
have been the main driver of reserve increases for several years.
Further, the ratio of reserves to production in B.C. has increased from
20 years in 2008 to 27 in 2013. Although B.C. has access to North
American markets by pipeline via the spectra Gas Transmission
system, Nova Gas Transmission, and their interconnections, shale gas
development has created supplies that exceed demand in available
pipeline markets.
There have been numerous LNG projects proposed to carry B.C. natural
gas to offshore markets. A current list of those projects is presented in
Table 4.7
3 The Conference Board of Canada, Canadian Outlook, 51.
4 According to Natural Resources Canada, the term “unconventional gas” encompasses tight gas sands, coalbed methane, shale gas, and gas hydrates.
5 Remaining reserves refer to natural gas that is recoverable under current economic and technical conditions, including undeveloped reserves that have a reasonable probability of existing, less cumulative production.
6 BC Oil and Gas Commission, Hydrocarbon and By-Product Reserves.
7 Compiled from Government of British Columbia, LNG in BC.
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The information in the table illustrates the high level of interest in LNG
projects in the province, but should not be considered indicative of the
number of projects that might proceed or their potential timing. some
of the smaller projects will serve local markets along the B.C. coastline,
with the larger projects targeting export markets. Given that no project
has yet begun its construction phase, which will take a minimum of
four years to complete, the projects identified before 2020 will likely
Table 4Proposed B.C. LNG ProjectsLocation Project Sponsors Capacity (MTPA) In-service
Campbell River Discovery LNG Quicksilver Resources 20 2021
Delta Wespac Westport Midstream 3 2016
Kitimat Cedar LNG Cedar LNG Export Development Ltd. 14.5 2020
Kitimat Douglas Channel LNG Altagas Ltd. and partners 0.55 2018
Kitimat Kitimat LNG Woodside Energy and Chevron Canada 10 TBD
Kitimat LNG Canada shell Canada and partners 24 TBD
Kitsault Kitsault Energy project Kitsault Energy Ltd. 20 2018
Nasoga Gulf Nisga’a LNG Nisga’a Nation TBD TBD
prince Rupert pacific Northwest LNG petronas and partners 18 2018
prince Rupert prince Rupert LNG BG Group 21 2019
prince Rupert Aurora LNG Nexen and partners 24 TBD
prince Rupert Grassy point LNG Woodside Energy 20 2021
prince Rupert New Times Energy Ltd. New Times Energy Ltd. 12 2019
prince Rupert Orca LNG Orca LNG Ltd. 24 2019
prince Rupert Watson Island LNG Watson Island LNG Corporation TBD TBD
prince Rupert WCC LNG Ltd. Imperial Oil/ ExxonMobil Canada 30 2024
squamish Woodfibre LNG project Woodfibre LNG project 2.1 2017
stewart Canada stewart Energy project stewart Energy B.C. 30 2018
TBD Triton LNG Altagas and partners 2.3 2019
TBD = to be determined Source: The Conference Board of Canada.
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see their timing adjusted. Further, the projects are at various stages of
evaluation and not all have even applied for the necessary project and
environmental approvals. however, the potential for a strong, vibrant
LNG industry continues to be explored by the companies involved.
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CHAPTER 2
LNG Industry Investments
Chapter summary
• supporting a 30 MTpA LNG industry would require a 5 bcf/d increase in B.C.’s natural gas production, more than doubling 2014 production levels.
• This natural gas would be sourced from the Montney tight gas region and the horn River shale gas region, whose gas is sweet and requires minimal processing.
• A dedicated natural gas transmission pipeline would supply each of the LNG facilities.
• Investment expenditure patterns and timing differ across the upstream/ midstream/downstream value chain segments.
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B.C.’s emerging LNG industry is at a critical stage in its development, as decisions to move forward with projects are being taken or considered in a global context of uncertain energy pricing and a local context of cost uncertainty. The B.C. government carried out initial impact studies based on a range of liquefaction capacities of from 80 to 120 MTPA of LNG.1 This analysis is substantially more conservative, and considers the potential collective impacts of the initial phases of three projects totalling approximately 30 MTPA of LNG capacity.
There are several projects that propose an initial configuration of two
trains of 6 to 7 MTpA each, and other projects that propose one initial
train at 5 to 6 MTpA. Two large projects and one small project could
easily be configured to produce 30 MTpA of LNG, which would require
approximately 5 bcf/d of natural gas for feedstock and fuel. An upside
sensitivity case considers an additional 23 MTpA of expansion capacity.
This expansion is less costly to develop than the initial capacity because
it involves adding new trains to existing LNG terminals and adding
compression stations to pipelines, both of which are less expensive than
the original projects.
This report examines the level of investment, GDp, and employment
for B.C. and Canada that would result from a 30 MTpA industry, with
the projects coming into production between 2021 and 2025. Each
LNG project will require significant investments to build the liquefaction
plants, investments in new transmission pipeline projects, and upstream
investments to drill wells, install gathering systems, and build natural
gas processing plants. This chapter summarizes these investments. The
following chapter traces the economic impact of those investments.
1 see Ernst & Young, Potential Revenues; Grant Thornton, Employment Impact Review; Grant Thornton, Potential LNG Revenue.
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Liquefaction Terminals
LNG Terminal Investment RequirementsThe timing of the investments shown in Table 5 is uncertain. Favourable
regulatory decisions and investor decisions will be required in order for
the projects to proceed as shown. To date, only one project has received
a conditional final investment decision. several others have received
natural gas export approvals, and await other regulatory decisions
that would be expected to lead toward financial commitments by
project proponents.
LNG Support Activities
UpstreamIn order to supply 30 MTpA of liquefaction capacity with sufficient
natural gas to meet natural gas feedstock and fuel requirements, B.C.’s
natural gas production must be increased by approximately 5 bcf/d. This
compares with 2014 raw gas production of 4.6 bcf/d.2
2 Raw natural gas production refers to the volume of natural gas as measured at the point of production. Marketable natural gas available reflects losses from natural gas processing (to remove impurities and by-products) as well as receipts from Alberta, Yukon, and the Northwest Territories. All numbers are from Government of British Columbia, B.C.’s Natural Gas & Oil Statistics.
Table 5Downstream Investments During Construction and Operations Phases(2015 C$ millions)
2016–20 2021–25 2026–30
Initial phase 27,559 5,668
Expansion phase 9,761 8,014
Source: The Conference Board of Canada.
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The LNG projects or their upstream partners for several of the proposed
projects have received National Energy Board approval for the natural
gas export volumes associated with their projects. The export licensing
process requires the applicant to demonstrate that the volumes to be
exported are surplus to foreseeable Canadian requirements, but it does
not require the applicant to demonstrate the source of the natural gas in
any detail or to verify that there is sufficient production capacity to meet
projected needs. For the purposes of this report, we have assumed that
the natural gas supply will come from British Columbian sources, and
that it is incremental to existing supplies rather than a diversion of those
supplies. As a result, the incremental natural gas production associated
with the three projects (initial phase only) would amount to at least a
doubling of provincial natural gas supply.
The upstream investments required to supply 30 MTpA of LNG projects
are shown in Table 6. For the initial 10 years, as the LNG projects are
implemented, annual upstream investments are expected to average just
over $5 billion per year. These investments will put in place the wells,
gathering systems, and field processing facilities to supply 5 bcf/d of
marketable natural gas for delivery to the liquefaction plants, as well as
the pipeline fuel required for the transmission lines (assumed at 2 per
cent of throughput). Additionally, because both Montney and horn River
wells show high initial production rates but very steep initial decline
rates, significant long-term drilling activity will be required to maintain
the targeted production level. The investments shown in the upper half
of Table 6 are for the initial projects only and would increase by the
amounts in the lower half of the table (labelled expansion phase) should
additional liquefaction trains be constructed at those terminals.
There are two major areas in B.C. that are expected to supply natural
gas for the proposed LNG projects: the Montney tight gas region and the
horn River shale gas region.3 The Montney region is close to Dawson
3 This discussion is based on three documents from the BC Oil and Gas Commission that provide further details: Hydrocarbon and By-Product Reserves in British Columbia; Horn River Basin Unconventional Shale Gas Play Atlas; and Montney Formation Play Atlas NEBC.
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Creek, B.C., and includes a range of low permeability formations that
contain a mix of hydrocarbons. A significant portion of the region
produces natural gas with attractive components of propane (C3), butane
(C4), and pentanes plus (C5+), which refers to a raw mix of pentanes
and heavier hydrocarbons. some areas within the Montney produce
oil. Other areas produce natural gas with lower liquids content. The
importance of the natural gas liquids is that they provide a revenue
stream to supplement the natural gas value. They also require more
extensive processing before putting the natural gas into a transmission
pipeline. The raw natural gas in the Montney region contains only
small volumes of sulphur compounds, carbon dioxide (less than 1 per
cent), and water that must be removed before the gas is delivered to a
transmission pipeline.
The horn River shale region is located farther north than the Montney,
in the general region of Fort Nelson, and adjacent to the Liard region
that has been producing natural gas for decades. horn River natural gas
contains very small amounts of C3 through C5+ and has much higher
carbon dioxide content (typically 10 per cent). (see Exhibit 1.)
Table 6Upstream Investments During Construction and Operations Phases(2015 C$ millions)
2016–20 2021–25 2026–30 2031–25 2036–40 2041–45 2046–50 2051–55
Initial phase
Wells 17,623 21,521 18,669 18,214 18,163 18,156 18,155 18,155
Gathering 8,812 3,228 2,800 2,732 2,724 2,723 2,723 2,723
Initial total 26,435 24,749 21,469 20,946 20,887 20,879 20,878 20,878
Expansion phase
Wells 10,374 17,245 15,153 14,225 14,674 14,667 14,667
Gathering 5,187 8,623 7,576 7,363 7,337 7,334 7,333
Expansion total 15,561 25,868 22,729 21,588 22,011 22,001 22,000
Source: The Conference Board of Canada.
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Exhibit 1Natural Gas Plays in British Columbia
Source: BC Oil & Gas Commission.
Horn River Basin
Liard Basin
CordovaEmbayment
Montney
Fort Nelson
Fort St. John
Dawson Creek
Kelowna
Victoria
The required investments shown in Table 6 were developed based on
a combination of Montney and horn River supplies. Both the pacific
NorthWest (pNW) LNG and LNG Canada projects are expected to rely
heavily on Montney supplies, with Kitimat LNG supplied primarily from
horn River.4
4 Based on the current land holdings and drilling programs of the project partners.
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The investments are based on the total natural gas supply required
from each region, the number of wells that must be drilled annually to
maintain production, and the costs of drilling and completing wells, plus
gathering system expenditures. For each region, the BC Oil and Gas
Commission has published typical well performance data for the initial
rate of production as well as production through time.5 Well drilling and
completion costs are based on the petroleum services Association of
Canada (psAC) well cost studies for 2015.6 The well-level assumptions
are shown in Table 7.
The relatively larger well counts for Montney supplies result from two
factors. First, horn River is assumed to supply only 20 per cent of the
initial liquefaction capacity. second, the higher initial production from
horn River wells more than offsets a steeper initial decline so that
fewer wells are required to establish and maintain a given production
level in the horn River region compared with the Montney region. The
well counts and investment numbers shown in the tables should be
considered conservative because they are based on a limited drilling
5 These type curves are published in BC Oil and Gas Commission, Hydrocarbons and By-Product Reserves in British Columbia. We have adopted the p-50 type curves for this work.
6 petroleum services Association, 2015 Well Cost Study.
Table 7Montney and Horn River Performance Assumptions
Montney tight gas
Horn River shale
Initial production rate (000 cubic metres per day) 75 160
Initial 12-month decline (per cent) 34 44
Average drilling and completion costs (2015 C$ millions) 6.3 12.7
Wells drilled per year during initial LNG preparation phase 520 80
Wells drilled per year during LNG operations phase 450 60
Source: The Conference Board of Canada.
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history and performance of a well that is typically achieved with a 50 per
cent probability. Increasing that to 90 per cent probability of occurrence
would reduce the initial production assumption and increase the required
well count.
Although the expected drilling levels to support 30 MTpA of liquefaction
capacity are large at 600 wells per year for the initial phase, followed
by 510 wells per year in the longer term, the projected activity levels
are consistent with those seen in the past in British Columbia. Chart 1
illustrates historical drilling levels in the province over the past 25 years.
From 2000 to 2010, there were only three years where fewer than
600 natural gas wells were drilled. More recently, activity has been
somewhat volatile in response to lower natural gas prices, with two of
the four years from 2011 to 2014 reporting above 500 natural gas wells.
The year-to-date performance for 2015 has been strongly and negatively
influenced by low prices. supplying the liquefaction terminals will require
a return to the drilling levels of the 2000–10 decade.
Chart 1Historical Drilling Activity in British Columbia(wells drilled 1990 to 2015 through September)
Sources: BC Oil & Gas Commission; The Conference Board of Canada.
1990 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
0
400
800
1,200
1,600
Gas Oil Cased Service Abandoned
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Natural Gas Processing FacilitiesThe natural gas production that will support the LNG industry will include
both Montney and horn River. This means that a portion of the gas
(Montney) will be liquids rich with low carbon dioxide content and a
portion (horn River) will have higher carbon dioxide content with limited
liquids. Both sources will require processing to meet the specifications
for inlet to a transmission pipeline. Table 8 shows the expected
investment for natural gas processing to accompany the initial and
expansion phases of the liquefaction plant capacity.
The natural gas processing facilities must be constructed so that they
are able to operate when the natural gas production begins from new
wells. The initial five-year period will include natural gas that will be sold
to other markets while the liquefaction plants are being constructed.
Because natural gas processing plants can operate for decades
with regular maintenance, large-scale investments beyond the initial
construction period will not be required until the liquefaction plants
expand. The investments shown in Table 8 are based on the costs of
recent sweet gas processing facilities built in British Columbia.
The facilities built to process Montney natural gas will include the
capacity to extract at least a raw mix of natural gas liquids, store them
temporarily, and load them into trucks that will carry them to their
destination. This report has not considered how those liquids will be
Table 8Natural Gas Processing Investments During Construction and Operations Phases(2015 C$ millions)
2016–20 2021–25 2026–30
Initial phase 3,602 2,201
Expansion phase 2,400 2,200
Source: The Conference Board of Canada.
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marketed or the potential economic impact on the liquids industry.
Based on the liquids production reported for 2013 and the marketable
gas requirements of the three LNG projects of 51.7 bcm (1.825 tcf),
the processing facilities treating natural gas before transport to the
liquefaction plants could produce as much as 2.1 million cubic metres
(13 million barrels) of pentanes plus, 0.6 million cubic metres of propane
(95 million barrels), and 0.6 million cubic metres (95 million barrels)
of butane per year. The production of natural gas liquids would likely
decline through time because the most liquids-rich prospects would be
targeted first as the natural gas resource is developed. These volumes
are for total liquids production. however, natural gas processing does not
typically remove all of the liquids in the natural gas stream. The portion
of liquids that is not extracted at the processing plants will be separated
by the refrigeration process at the liquefaction plant, then sold, used at
the liquefaction plant, or re-injected into the LNG according to project
requirements and market opportunities.
PipelinesEach of the LNG plants considered in this report is expecting that it will
be supplied by a dedicated natural gas transmission pipeline. Two of the
three pipeline projects that have been advanced to date will be owned
by TransCanada. The pipelines will be built with a 36-inch or 48-inch
diameter pipe, designed with a capacity to match the initial liquefaction
requirements of the size of liquefaction plant they will supply. Each
pipeline will initially include compressor stations sufficient to move the
required volume of natural gas. Expansions of the pipeline projects to
accommodate additional liquefaction trains will be accomplished by
adding compressor stations and compressor units; no additional pipe is
expected. The investment requirements for the initial pipelines and for
potential expansions are shown in Table 9. These investments represent
the construction phase only. Ongoing maintenance capital over the
operating years is excluded. Further, the investments in compressor
stations provide an indication of the potential future investments should
expansions be required to supply additional liquefaction trains. It is
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also possible that should additional LNG terminals be built, some of
these proposed pipelines could be expanded to meet the needs of
those terminals.
The remainder of this chapter provides a brief profile of the three major
pipeline projects put forward to date.
Prince Rupert Gas Transmission ProjectThe prince Rupert Gas Transmission (pRGT) project will supply natural
gas to the pNW LNG project. pRGT is a wholly owned subsidiary of
TransCanada, which will own a majority interest in the project and act as
operator. pRGT is structured with TransCanada as the master partner,
which allows for other investors to participate.
pRGT will carry natural gas 900 kilometres from hudson’s hope to
Lelu Island.7 It is the most advanced of the pipeline projects, having
recently received all of the final permits it needs from the BC Oil and
Gas Commission; it also has received a B.C. Environmental Assessment
Certificate.8 (see Exhibit 2.)
7 The project description in this chapter relies on the project’s Application for Environmental Assessment Certificate as filed with the BC Environmental Assessment Agency.
8 TransCanada, Prince Rupert Gas Transmission Project.
Table 9Transmission Pipeline Investments During Construction and Operations Phases(2015 C$ millions)
2016–20 2021–25 2026–30
Initial phase
Onshore pipelines 6,094 1,607
Offshore pipelines 937
Compressor stations 541 269
Initial total 7,572 1,876
Expansion phase
Expansion total 1,488 539
Source: The Conference Board of Canada.
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The initial pipeline will use a 40-inch diameter pipe for the onshore
portion (780 kilometres) and twin 36-inch lines for offshore segments
(110 kilometres). It will include three compressor stations and provide
2 bcf/d of natural gas delivery capacity. should expansion be required,
Exhibit 2Prince Rupert Gas Transmission
Source: TransCanada.
16
16
37
37
97
16
97
37
Granisle
New HazeltonHazelton
Stewart
Cranberry Junction
Port Edward
Pink Mountain
Wonowon
Hudson’sHope
ALB
ER
TA
BR
ITIS
H C
OLU
MB
IA
ALA
SK
A
Fort St. James
Mackenzie
Taylor
Fort St. John
Dawson Creek
Tumbler Ridge
Prince GeorgeVanderhoofFraser Lake
Burns Lake
SmithersTelkwa
Houston
Terrace
Kitimat
Prince Rupert
Chetwynd
Prince Rupert Gas Transmission (PRGT) Proposed Route Initial Build Compressor StationPotential Future Compressor Station
Proposed Pacific NorthWest LNG Export Facility (3rd party)TransCanada’s NOVA Gas Transmission Ltd. (NGTL) Existing SystemProposed North Montney Mainline ProjectHighwaysCities and Towns
Prince Rupert Gas Transmisson Other
27
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pRGT will construct five more compressor stations to increase the
capacity to 3.6 bcf/d without installing any additional pipe. It will be
operated at traditional pressure (1,440 pounds per square inch) and will
require the inlet natural gas to be processed to meet a conventional
pipeline specification. This means that liquids-rich natural gas will require
processing to remove most of the liquids before the gas enters the
pRGT system.
The applied-for schedule showed construction beginning in early 2015
and the pipeline coming into service in late 2018, a construction period
of just under four years. This was predicated on all of the necessary
approvals being received before the end of 2014. having received all of
the necessary approvals, the project now awaits a go-forward decision
from the pNW LNG project. That decision will not be final until pNW LNG
receives a positive decision from the federal government pursuant to
the Canadian Environmental Assessment Act.9 The four-year timing for
construction may be adjusted depending on seasonal and other factors
once the pNW LNG decision is finalized and the in-service date for the
liquefaction plant is determined.
Coastal GasLinkThe Coastal GasLink project is also owned by TransCanada and
will supply natural gas to the LNG Canada liquefaction terminal, a
joint venture led by shell.10 This pipeline will receive natural gas at
Groundbirch (just west of Dawson Creek, B.C.) and deliver it to the LNG
Canada facility near Kitimat, B.C., a distance of 650 kilometres. It will be
a 48-inch pipe, with two compressor stations, delivering an initial volume
of 1.7 bcf/d. should expansion be required, up to five more compressor
stations could be built, raising the delivery capacity to 5 bcf/d without
installing any additional pipe. The pipeline inlet will be interconnected
9 Ibid.
10 The information for Coastal GasLink is based on the project description from the Coastal GasLink pipeline project, project Description filed with the BC Environmental Assessment Agency in October 2012, as revised and updated.
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with TransCanada’s Nova Gas Transmission Limited (NGTL) line at
Groundbirch, providing potential flexibility in natural gas supplies for the
LNG project and in markets for local natural gas production.
The Coastal GasLink project structure is similar to that of pRGT in that
is a wholly owned subsidiary of TransCanada, which will act as general
partner, own at least 50 per cent of the project, and act as operator. It
differs in that the project has been divided (at a point near Vanderhoof,
B.C.) into east and west segments, each with its own partnership
structure. This will enable NGTL to contract with Coastal GasLink for
capacity on the eastern segment of the project.
This project is less advanced than pRGT, but has applied for the
necessary environmental approvals with the BC Environmental
Assessment Agency and for facilities approvals with the BC Oil and Gas
Commission. Coastal GasLink expects a four-year construction period,
with initial natural gas deliveries to coincide with the in-service date of
LNG Canada. (see Exhibit 3.)
Pacific Trails PipelinesThis project would supply the Kitimat LNG facility. It is a 463-kilometre,
42-inch diameter pipeline from summit Lake, B.C., to the Kitimat LNG
site. The project is at application stage, with only a limited number of the
161 required approvals having been issued to date. The original project
application anticipated one compressor station with an initial delivery
capacity of 1 bcf/d. should both trains of the Kitimat LNG project be
constructed, pacific Trail pipelines would add compression. The original
plan was based on a four-year construction period after all approvals
had been granted. The current plan is to maintain the original four-year
construction program and to coordinate the pipeline in-service date with
the start-up of Kitimat LNG.
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Exhibit 3Coastal Gas Link
Source: TransCanada.
16
16
37
37
97
27
16
97
37
Granisle
New HazeltonHazelton
Stewart
Cranberry Junction
Pink Mountain
Wonowon
Hudson’sHope
ALB
ER
TA
BR
ITIS
H C
OLU
MB
IA
ALA
SK
A
Fort St. James
Mackenzie
Taylor
Fort St. John
Dawson Creek
Tumbler Ridge
Prince GeorgeVanderhoofFraser Lake
Burns Lake
SmithersTelkwa
Houston
Terrace
Kitimat
Prince Rupert
Chetwynd
Coastal Gaslink Pipeline ProjectStudy Corridor
Proposed Coastal Gaslink Compression and Metering Facility
Proposed Coastal Gaslink Metering Facility
Proposed Future Coastal Gaslink Compression Facilities
Proposed LNG Canada Facility (3rd party)TransCanada’s NOVA Gas Transmission Ltd. (NGTL) Existing SystemProposed North Montney Mainline ProjectProposed Merrick Mainline ProjectHighwaysCities and Towns
Coastal Gaslink Pipeline Project Other
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CHAPTER 3
Economic Impacts
Chapter summary
• Between 2016 and 2045, the average annual investment required to support a 30 MTpA LNG industry in B.C., across all value-chain segments would average $7 billion per year, adjusted for inflation.
• These investments will increase Canadian GDp by $7.4 billion annually over the course of 30 years, with $5.3 billion of this growth occurring in British Columbia.
• Increased economic activity will lead to growth in employment; on a national level, employment will increase by 65,000 jobs, with 46,800 occurring in British Columbia.
• Annual government revenues, including corporate, personal, and indirect taxes and royalty revenues, would increase by approximately $6 billion annually, of which $3 billion would accrue to the provincial government.
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Key Assumptions and Methodology
This chapter quantifies the economic impacts of developing a 30 MTPA LNG industry in British Columbia. As discussed previously, this report uses an estimated detailed breakdown of investment spending across upstream, midstream, and downstream sectors. Between 2016 and 2045, the total investment required to produce a sufficient quantity of natural gas and to construct and operate the necessary infrastructure and facilities will average $7 billion per year, adjusted for inflation. (See Table 10.)
This report relies on macroeconomic models of B.C.’s economy to
produce the economic impact analysis. statistics Canada’s inter-regional
input-output model of Canada’s economy is used to produce detailed
industry and employment impacts for B.C., as well as to produce
supply chain impacts across other provinces. These results are then
used as input into the Conference Board’s own econometric model
of the B.C. economy. While the Conference Board model contains a
Table 10Average Annual Spending for 30 MTPA LNG Capacity (2015 C$ millions)
Time Amount
Upstream 2016–45 4,509
Transmission 2017–45 354
Midstream 2019–45 527
LNG terminal 2016–45 1,647
Total spending 2016–45 6,971
Source: The Conference Board of Canada.
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more aggregated industrial sector, it has the benefit of assessing the
impact of additional income, generated through changes in wages and
profits, on the economy. In addition, the Conference Board’s model can
produce impacts on a broad range of economic indicators on a year-by-
year basis.
The Conference Board’s provincial forecasting model captures the sum
of the direct, indirect, and induced impacts on B.C.’s economy, based
on its estimated historical relationships. The model also incorporates a
detailed modelling of prices, households, and businesses, and provides
economic impact results for a wide range of economic indicators. In
addition, it contains a detailed accounting of government revenues. (see
“What Is the Difference Between Direct, Indirect, and Induced Impacts?”)
What Is the Difference Between Direct, Indirect, and Induced Impacts?
Direct impact measures the value added to the economy from the increased
infrastructure spending from those firms employed to either build structures or
manufacture equipment. Because much of the equipment is expected to be
imported, the direct effect on B.C.’s economy from machinery and equipment
investment is muted.
Indirect impact measures the value added from supply chain effects—as
demand for intermediate inputs or other support services is lifted. Increased
demand for construction and machinery will bolster activity in transportation,
financial, insurance, and other services. Moreover, imported materials and
machinery will bolster activity in transportation and warehousing.
Induced impacts are derived when employees of the aforementioned industries
spend their earnings and owners spend their profits. These purchases lead to
more employment, wages, income, and tax revenues, and can be felt across a
wide range of industries.
Source: The Conference Board of Canada.
The Conference Board’s provincial forecasting model captures the sum of the direct, indirect, and induced impacts on B.C.’s economy.
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Consequently, increased production from specific industries will not
only have direct impacts on the economy, but will also spread through
the economy via a series of multiplier effects. Indirect effects—in the
form of increased demand—are first felt by industries that are direct
suppliers. second-round induced effects produce a widespread impact
(albeit usually smaller) on all sectors of the economy, largely through a
general increase in consumer spending. The overall economic multiplier
is calculated as the sum of all value-added impacts (direct, indirect, and
induced) divided by the initial constant dollar spending generated by
the investment.
It is important to note that the constant dollar value of the investment
does not necessarily result in a one-to-one increase in real GDp on
B.C.’s economy. This is because a good portion of the investment is
assumed to go toward the purchase of machinery and equipment, which
is imported either from other provinces and territories or overseas. For
Canada, the overall multiplier is greater than 1 because of the positive
supply chain impact on other provinces and territories. (see Table 11.)
For B.C. alone, the multiplier is less than 1 due to the leakages through
imports from overseas and from other provinces and territories. (see
Table 12.)
Table 11Average Economic Impact of 30 MTPA LNG Capacity on Canada’s Economy
Upstream Transmission Midstream LNG terminal Total
Economic multipliers 1.03 0.95 1.05 1.06 1.06
GDp at market prices (2015 $ millions) 4,663 335 551 1,751 7,385
Employment (000s) 43 3 5 14 65
Source: The Conference Board of Canada.
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In particular, the midstream production trains and the LNG terminals
represent new lines of industry to the Canadian economy—hence,
part of the investment will be spent overseas to import the required
machinery and equipment and specialized labour to develop and
operate such projects. Additionally, the upstream and pipeline sectors
could import components from other Canadian oil and gas jurisdictions,
such as Alberta and Newfoundland and Labrador. Moreover, even as
demand for machinery and equipment produced in B.C. is lifted, the
Table 12Average Annual Impacts in British Columbia for 30 MTPA LNG Capacity
Upstream Transmission Midstream LNG terminal Total
Total investment (2015 $millions) 4,509 354 527 1,647 6,971
GDp at market prices (2015 $ millions) 3,720 232 285 1,080 5,281
GDp deflator (percentage difference) 0.07 0.06 0.08 0.09 0.29
Consumer price index (percentage difference) 0.06 0.05 0.07 0.07 0.24
Average weekly wages industrial composite (percentage difference)
0.13 0.09 0.12 0.13 0.46
personal income (current $ millions) 3,810 194 472 1,173 5,595
household disposable income (current $ millions)
3,219 157 384 1,043 4,759
population of labour force age (000s) 23 2 3 7 34
Labour force (000s) 25 2 2 6 35
Employment (000s) 34 2 3 9 47
Unemployment rate (level difference in rate) –0.37 –0.02 –0.03 –0.09 –0.5
Retail sales (current $ millions) 1,356 89 136 396 1,961
housing starts (000s) 0.5 0.02 0.05 0.14 0.7
Net operating surplus: corporation (current $ millions)
1,031 79 119 704 1,918
personal income taxes (current $ millions) 786 47 65 206 1,096
Indirect taxes (current $ millions) 595 45 77 100 808
Economic multipliers 0.83 0.66 0.54 0.66 0.76
Note: Level difference shock minus control except where otherwise indicated.Source: The Conference Board of Canada.
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increased demand for manufactured goods will require intermediate
inputs purchased from suppliers that may be outside the provincial
boundaries. This supply chain effect on imported components and labour
will have a dampening effect on the impact of the overall multiplier on
B.C.’s economy.
Economic Impact Results
Overall Economic Impact of 30 MTPA LNG CapacityThis report expects that the total average annual investment of roughly
$7 billion and will permanently lift Canadian real GDp by $7.4 billion
a year over the next 30 years. (see Table 11). As shown in Table
12, $5.3 billion of the $7.4 billion permanent annual increase in real
economic activity will occur in British Columbia. Beginning in 2016,
British Columbia’s real GDp will rise from $4.6 and will reach a peak of
$10.4 billion by 2020 before slowing down to around $4.7 billion by 2045.
(see Chart 2.)
Chart 2Real GDP Impact of 30 MTPA LNG Capacity on B.C.’s Economy Over Time (2015 $ millions)
Source: The Conference Board of Canada.
0
2,000
4,000
6,000
8,000
10,000
12,000
Upstream LNG terminal Transmission Midstream
2016 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
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Growth in B.C.’s economic activity will increase demand for materials
and services outside the province—leaving approximately $2.1 billion in
real GDp growth that occurs in other provinces and territories. Overall,
combining direct, indirect, and induced effects for every real dollar spent
increases Canada’s real GDp by $1.06, of which $0.76 will accrue to
British Columbia.
The sizable boost to economic activity will be met with increased
employment. Nationally, employment is bolstered by roughly 65,000—
with 46,800 of those jobs occurring in British Columbia. (see Table 13.)
Overall, upstream activity generates the majority of new employment
within the province (as shown in Chart 3), while transmission, midstream,
and terminal activity contribute just over 27 per cent of jobs. peak
employment in B.C. will reach 93,0001 person-years in 2020.
supply chain impacts boost employment across a wide range of services
sector industries, which include transportation and warehousing, finance,
insurance, and real estate, and other commercial services. Wholesale
and retail trade employment is largely boosted by induced economic
impacts—specifically, that of households spending their increased
income. The increases to population, employment, and wages will lift
(nominal) personal household income by $5.6 billion a year over the
2016–45 period. This results in an annual boost to household spending,
including retail sales ($2 billion) and housing starts (700 units). (see
Table 12.)
The Conference Board’s economic model of B.C.’s economy captures
the effects of a regionally mobile workforce. As such, an increase in
employment is not reflected, one-for-one, in a decrease in the number
of those unemployed. For example, as job prospects improve in B.C.
relative to other provinces, net interprovincial migration flows into the
province will also increase. Moreover, as more people naturally enter
the workforce, the impact on the unemployment rate is mitigated.
1 A person-year of employment is a job held for a period of one year. A single job created by a project can last for several years, thereby creating more than one person-year of employment. For instance, a project that creates two jobs that last for 10 years is said to have created 20 person-years of employment.
The sizable boost to economic activity will be met with increased employment.
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Chart 3Employment Impact of 30 MTPA LNG Capacity on B.C.’s Economy Over Time
Source: The Conference Board of Canada.
0
20,000
40,000
60,000
80,000
100,000
Upstream LNG terminal Transmission Midstream
2016 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
Table 13Average Annual Labour Impact of 30 MTPA LNG Capacity on BC’s Economy
Upstream Transmission Midstream LNG terminal Total
Total employment 34,006 1,932 2,625 8,574 46,810
Agriculture 203 22 18 100 340
Other primary sector 6,217 34 49 216 6,510
Utilities 128 13 11 49 199
Manufacturing 3,337 145 128 647 4,239
Construction 9,797 489 1,333 1,848 13,317
Wholesale and retail trade 4,554 414 235 1,584 6,750
Transportation and warehousing 858 98 20 1,235 2,206
Finance, insurance, real estate 268 107 37 406 810
Other commercial services 6,416 464 461 2,021 9,301
public sector (Including education, health, public administration)
2,228 147 333 481 3,151
Unemployment –8,606 –367 –698 –2,162 –11,751
Note: A negative unemployment value refers to a reduction in the number of people who are unemployed, due to the projects. On average, the number of people unemployed is reduced by 11,700 per year.Source: The Conference Board of Canada.
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Given the sizable addition to employment from the development and
operations of the LNG industry, the labour force is lifted permanently,
by roughly 35,000 persons. Despite this offsetting boost to the supply
of labour, the province’s unemployment rate is expected to permanently
drop by 0.5 percentage points. (see Table 12.) This represents a drop
of 11,751 people per annum in the number of people unemployed in
British Columbia. (see Table 13.)
Fiscal Impact of 30 MTPA LNG CapacityIn addition to the economic impacts, both federal and provincial
governments stand to reap significant fiscal dividends from the
development of 30 MTpA LNG capacity in the province. Table 14
highlights the various sources of income for both governments. higher
labour income and corporate profits result in a boost to both federal and
provincial government revenues in each year over the 30-year period. In
current dollar terms, the federal government would see corporate income
tax revenues up by nearly $537 million while B.C. would benefit from
an additional $211 million in corporate income tax. In addition, personal
income taxes will add another $2 billion to the federal government and
$1.1 billion to the B.C. government coffers. Indirect taxes, including sales
taxes and other taxes on products, will provide an additional $808 million
and $577 million a year, respectively, to provincial and federal coffers.
Natural gas royalty revenues accruing to the B.C. government are also
sizable—30 MTpA of production is expected to generate $686 million
per year, completely eclipsing the $220 million the B.C. government is
expecting to collect for the 2015–16 fiscal year, as contained in the first
quarter fiscal update released in september 2015.2
In addition to royalties and other taxes mentioned above, B.C. stands
to benefit from LNG tax revenue. British Columbia’s government has
introduced a two-tier tax on net income of LNG producers. The Tier 1
tax rate of 1.5 per cent applies to an operator’s net operating income
after commercial production begins. The Tier 2 tax is levied at 3.5 per
2 Government of British Columbia, First Quarterly Report: September 2015, 20.
Federal and provincial governments stand to reap significant fiscal dividends.
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cent (rising to 5 per cent in 2037) on net income less capital investment
deductions for the tax year until the capital costs associated with
constructing the LNG facility have been fully deducted. Our estimate
indicates that LNG tax revenues could boost B.C.’s government coffers
by an average of $208 million a year over 2021–45.
The federal government also benefits from reduced employment
insurance payments and an increase in employment insurance revenues
due to the lift to employment and reduction in the number of those who
are unemployed.
Implications of Possible Expansion
Given the vast natural gas resources in Northern B.C., the initial
30 MTpA LNG capacity could be expanded to harness more LNG for the
market, if market and regulatory conditions were favourable. This report
analyzes the economic and fiscal impact of a 40 per cent increase to the
initial development and operational investment. (see Chart 4.)
Table 14Annual Fiscal Impact of a 30 MTPA LNG Industry(millions of current $)
Upstream Transmission Midstream LNG terminal Total
B.C. corporate income tax 113 9 13 77 211
Federal corporate income tax 289 22 33 197 537
B.C. personal income tax 786 47 65 206 1,096
Federal personal income tax 1,478 89 123 386 2,060
B.C. indirect taxes 595 45 77 100 808
Federal indirect taxes 425 32 55 72 577
B.C. royalty revenue 686 – – – 686
B.C. LNG tax revenue – – – 208 208
Source: The Conference Board of Canada.
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Expanding the infrastructure and boosting drilling and production
of natural gas production could add another $5.1 billion per year to
Canada’s real GDp, $2.3 billion will accrue to B.C., and the remaining
$2.8 billion will spread across the rest of the provinces and territories.
The expansion phase will generate additional 49,000 jobs across
Canada, with 28,000 occurring in British Columbia. (see Chart 5.)
Chart 4Real GDP Impact of a 40 Per Cent Expansion($ millions)
Source: The Conference Board of Canada.
0
4,000
8,000
12,000
Initial impact With expansion
2016 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
Chart 5Employment Impact of a 40 Per Cent Expansion
Source: The Conference Board of Canada.
0
20,000
40,000
60,000
80,000
100,000
120,000
Initial impact With expansion
2016 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
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Economic Impact Summary
In summary, the simulation results suggest that for each (inflation-
adjusted) dollar of direct investment in developing and operating a
30 MpTA increase in LNG capacity, real GDp will rise by $1.06 in
Canada, of which $0.76 will occur in British Columbia. Over the 2016–45
period, development and operations will permanently lift real GDp in
Canada by roughly $7.4 billion and support 65,000 jobs on an ongoing
basis. The lion’s share of the impacts will occur in B.C., with real GDp
lifted by $5.3 billion and employment up by 47,000 on an ongoing
basis—enough to lower the province’s unemployment rate by 0.5 per
cent permanently. The fiscal impact is equally significant. A 30 MTpA
increase in LNG capacity would boost revenues for the federal and B.C.
governments by an average of $3.2 billion and $3 billion, respectively,
over 2016–45.
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CHAPTER 4
Labour Impacts
Chapter summary
• B.C. is not currently experiencing a labour shortage, which indicates that it may have a labour force large enough to meet the needs of an LNG industry. This assumes that it can mobilize and develop the skill sets of individuals who are unemployed or out of the workforce.
• pressures that include slow population and labour force growth and rising retirements and labour needs are trends that will strain B.C.’s labour market.
• When attempting to mobilize and train labour to support an LNG industry, governments and LNG employers will encounter challenges that include competition for labour in the remote communities where LNG projects are located and engaging potential Aboriginal workers.
• Governments will also need to consider how to support inter and intraprovincial migration, education, and training, and prepare workers for post-LNG employment.
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The labour and skills needs associated with LNG developments in B.C. will have a noticeable impact on the province’s labour market. Targeted labour and skills strategies will be needed to ensure not only that LNG-related employers are able to attract and retain the skilled labour they need, but also to minimize negative impacts on other employers, while providing good employment options for local workers, and especially Aboriginal communities.
Employment, Unemployment, and Labour Market Participation
LNG development will occur in a labour market showing mixed signals
about labour and skills supply and demand. At 6.3 per cent, B.C.’s
unemployment rate (for those aged 15 and older) does not indicate
serious labour shortages at first glance. While it is below the overall
Canadian unemployment rate (7.1 per cent) and has fallen by more than
a percentage point over the past five years, it has not yet approached
levels associated with the tight labour markets seen in 2014 in
saskatchewan (3.5 per cent unemployment) and pre-recession Alberta
(3.4 to 3.6 per cent). Nor has B.C.’s unemployment rate returned to its
pre-recession levels of below 5 per cent. (see Chart 6.)
Additionally, B.C. has a labour force participation rate (63.7 per cent)
that is slightly lower than the Canadian average (65.9 per cent), and well
below that of provinces that have experienced tight labour markets—
namely, Alberta (73.5 per cent) and saskatchewan (70.3 per cent).1
B.C.’s participation rate has remained relatively stable, albeit dipping
a bit in recent years. The key point is that the gap between B.C. and
provinces that have experienced labour and skills pressures is sizable,
1 statistics Canada, CANsIM table 282-0087; stuckey and Munro, Skills for Success, 15.
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suggesting that B.C. is not currently facing a labour shortage in the
aggregate, and has opportunities to mobilize additional labour should
LNG developments and other projects begin to strain the labour market.
however, whether the potential labour has the required skills is a
separate challenge. (see Chart 7.)
Chart 6Unemployment Rate, Canada and Selected Provinces (per cent unemployed, aged 15 and over)
Sources: Statistics Canada; The Conference Board of Canada.
Sep 2006 Sep 2007 Sep 2008 Sep 2009 Sep 2010 Sep 2011 Sep 2012 Sep 2013 Sep 2014 Sep 2015
3
4
5
6
7
8
9
Canada British Columbia Alberta Saskatchewan
Chart 7Labour Force Participation, Canada and Selected Provinces (per cent participation, aged 15 and older)
Sources: Statistics Canada; The Conference Board of Canada.
Sep 2006 Sep 2007 Sep 2008 Sep 2009 Sep 2010 Sep 2011 Sep 2012 Sep 2013 Sep 2014 Sep 2015
62
66
70
74
78
Canada British Columbia Alberta Saskatchewan
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In short, the unemployment and labour participation rates in B.C. suggest
that the province may have sufficient labour and skills to meet its needs
provided it can mobilize and train segments of the population who are
either unemployed or currently out of the workforce. however, other
indicators point toward increasing labour and skills pressures.
Lagging Population Growth and Rising Retirements
Once under way, LNG development will strain B.C.’s labour market
and will occur just as other trends create additional challenges. B.C.’s
population growth rate will average only 1.1 per cent between 2013 and
2035, making it “the slowest-growing province west of Quebec over
the long term.”2 According to Conference Board projections, migration
(primarily international, but also interprovincial) will be the most important
source of population growth in the province.3 Managing migration and
ensuring that newcomers are well integrated into the labour market will
be key challenges for governments and employers.
At the same time, the province’s population is aging and skilled workers
are retiring in large numbers. By 2035, people aged 65 and older will
make up nearly 26 per cent of the population, as opposed to 16.4 per
cent in 2013.4 The Conference Board’s B.C. Employer skills survey
reveals that many employers are worried about retirements of workers
with specialized skills. Overall, 57 per cent of employers say they are
“concerned” (35 per cent) or “very concerned” (22 per cent) about
imminent retirements. Concern is especially high among the province’s
largest firms, with 78 per cent of firms with 500 or more employers
saying they are “concerned” (46 per cent) or “very concerned” (32 per
cent) about retirements.5 (see Chart 8.)
2 The Conference Board of Canada, Provincial Outlook, 116.
3 Ibid., 114–16.
4 Ibid., 114.
5 stuckey and Munro, Skills for Success, 17–18.
Migration will be the most important source of population growth in the province.
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Slow Labour Force Growth and Rising Labour Needs
Given lagging population growth and rising retirements for the
foreseeable future, B.C. faces two or more decades of slow growth in
its labour force as a whole. Although migration will help, the Conference
Board nevertheless projects that annual labour force growth in B.C. will
be 1 per cent until 2020, falling to just 0.7 per cent by 2035.6 Meanwhile,
new economic developments—including LNG development—are
expected to put further strain on labour and skill markets during this
period. Overall, labour force growth may fall short of job openings in
B.C. until 2020 and beyond. The B.C. labour market outlook estimates a
deficit of 61,500 workers across the province by 2020—or approximately
2 per cent of the labour force (assuming a total labour force in the
province of about 2,750,000 in 2020).7
6 The Conference Board of Canada, Provincial Outlook, 117.
7 WorkBC, B.C. Skills for Jobs Blueprint, 2.
Chart 8B.C. Employers’ Concerns About Retirements in the Next 5 to 10 Years, by Firm Size(percentage of respondents, n = 854)
Sources: B.C. Employers Skills Survey 2014; The Conference Board of Canada.
Not at allconcerned
Only slightlyconcerned
Concerned Very concerned
0
10
20
30
40
50
1–19 100–49920–99 500+
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The challenges may be especially acute in particular regions. Although
roughly 90 per cent of all new job openings (all sectors) will be located
in B.C.’s three largest regions (Mainland-southwest, Vancouver Island/
Coast, and Thompson-Okanagan), growth in demand for workers is likely
to be highest in the Northeast and Mainland-southwest regions primarily
due to infrastructure projects.8 This will complicate efforts to recruit and
retain skilled labour for LNG construction in certain regions throughout
the province.
High-Demand Occupations
The occupational needs specific to LNG construction and operation will
be discussed in the next section. As context, however, a brief overview
of which occupations B.C. employers across the province expect to have
difficulty filling is useful. In the Conference Board’s B.C. Employer skills
survey, employers expressed concern about their ability to attract and
retain skilled workers to fill a wide range of occupations, many linked to
LNG development. More than a third (35 per cent) of the 854 employers
surveyed across all sectors of the economy expect to have difficulty
filling positions in business, finance, and administration. Nearly as many
expect difficulty finding qualified people to work in trades, transport, and
equipment operator occupations (30 per cent). And more than a fifth
of employers expect difficult hiring in sales and services occupations
(23 per cent) and natural and applied sciences occupations (22 per
cent)—many of which are relevant occupations for LNG construction and
operation.9 (see Chart 9.)
The responses differ by region, with employers in B.C.’s North and
Central Interior much more likely (45 per cent) than employers in
other regions (28 per cent) to express concern about hiring for trades,
transport, and equipment operator occupations. Concern about hiring
8 Ibid., 3.
9 stuckey and Munro, Skills for Success, 43–44. Note that percentages sum to more than 100 as employers were asked to indicate all categories in which they expect to have difficulty hiring people.
Employers expressed concern about their ability to attract and retain skilled workers to fill a wide range of occupations.
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difficulties in certain other occupational categories (i.e., occupations
unique to primary industry, processing, manufacturing, and utilities) is
also higher among B.C.’s North and Central Interior employers than
employers in other regions. This is likely a function not only of increasing
demand for these skills, but also a limited supply of such skills in
these communities.
A Challenging Labour Market for LNG Development
Key indicators of the B.C. economy—such as moderate unemployment
and low labour force participation—suggest that labour and skills
pressures have not quite taken hold. however, other signs—such as
slow labour force growth, rising retirements, and expectations of difficulty
in hiring for certain occupations—point toward emerging and growing
Chart 9B.C. Employers’ Concerns About Occupational Needs, by Region(percentage of regional responses, n = 854)
Sources: B.C. Employers Skills Survey 2014; The Conference Board of Canada.
Lower Mainland North and Central Interior Okanagan Boundary, Kootenay, and Southern Interior
Vancouver Islandand Central Coast
0
10
20
30
40
50
Business, finance, and administration
Trades, transport, and equipment operators
Sales and service
Natural and applied sciences
Social science, education, government service, and religion
Occupations unique to primary industry
Art, culture, recreation, and sport
Occupations unique to processing, manufacturing, and utilities
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challenges. As the LNG sector begins and accelerates its construction
and operation activities, employers are likely to face greater difficulty
attracting and retaining the labour and skills they need. how will LNG
activities change the situation, and what will LNG-related employers
need in particular?
Labour, Skills, and Occupational Needs of LNG Construction and OperationThe labour, skills, and occupations needed to develop B.C.’s LNG
potential are significant, though quantifying the exact size and nature of
those needs is difficult. Uncertainty remains about how many and what
kinds of LNG development projects will be pursued, when construction
will begin and end, and when operations will commence. Until industry
and regulators make decisions, these uncertainties will complicate
labour projections.
Additionally, labour and skills needs will vary by phase of development
(construction vs. operation); pace and timing of specific activities; role
in the supply chain (upstream, midstream, downstream, or indirect
activities); geographic location of activities; and local and provincial
labour market conditions. Despite the uncertainty, a general picture of
the labour, skills, and occupations needed to support 30 MTpA of LNG
capacity can be drawn.
Specific Occupational Needs LNG development requires workers with a range of skills to fill many
occupational types. The Conference Board’s analysis of employment
needs for the current scenario includes a breakdown by occupational
category for all direct, indirect, and induced employment needs, but not
by more specific occupational type, nor by direct, indirect, and induced
employment. For estimates of specific direct occupational needs, we turn
to observable patterns in the secondary literature and apply those to the
current scenario.
The labour, skills, and occupations needed to develop B.C.’s LNG potential are significant.
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Analyses produced by KpMG and the B.C. Natural Gas Workforce
strategy Committee (B.C. NGWsC) show that the direct occupational
needs for construction lean heavily toward the trades and construction
trades helpers and labourers. The B.C. NGWsC analyses expect that
57 per cent of direct construction needs will be in trades and 25 per cent
for construction trades helpers and labourers.10 (see Chart 10.)
Looking at just the trades slice, the specific kinds of trades required are
varied, though steamfitters, pipefitters, and gasfitters will be needed
most (47 per cent), followed by welders (21 per cent). (see Chart 11.)
In terms of operations, occupational needs will be primarily for process
operators (50 per cent), followed by a variety of tradespeople (25 per
cent) and others. (see Chart 12.) In particular, the B.C. NGWsC expects
10 Note that the overall employment numbers presented above include direct, indirect, and induced employment while the specific occupational needs numbers refer only to direct employment. Consequently, the proportions shown in charts 8 to 10 cannot be applied to the total number of jobs.
Chart 10LNG Construction—Occupational Needs(per cent at peak construction)
Sources: B.C. Natural Gas Workforce Strategy Committee; The Conference Board of Canada.
5725
3211
11Trades
Construction trades helpers and labourers
Heavy equipment operators
Truck drivers and operators
Engineers
Managers, supervisors, and foremen
Other
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greatest need for oil and gas field workers, labourers, and operators;
supervisors in oil and gas drilling services; operators including plant,
process, and pipeline; truck drivers; and millwrights and machinists.11
11 petroleum human Resources Council of Canada, B.C. Natural Gas Workforce Strategy and Action, 8.
Chart 11Trades Workforce Required at Peak Construction(percentage of trades workers)
Sources: B.C. Natural Gas Workforce Strategy Committee; The Conference Board of Canada.
47
21
7
7
6
64 1 1
Steamfitters, pipefitters, and gasfitters
Welders
Carpenters, including scaffolders
Iron and sheet metal workers
Concrete finishers
Crane operators
Electrical and instrumentation
Insulators
Heavy-duty equipment mechanics
Chart 12LNG Operations—Occupation Needs(percentage of trades workers)
Sources: B.C. Natural Gas Workforce Strategy Committee; The Conference Board of Canada.
50
25
10
105
Process operators
Trades
Operations and maintenance management
Admininstration and other
Engineers
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Opportunities, Challenges, and Strategies
LNG employers may be hard-pressed to find all the workers with the
skills they need, at the right times, in the right places, and without
disrupting the labour market for other economic opportunities. Although
there appears to be enough slack in the B.C. labour market overall at
present (as indicated by moderate unemployment and relatively low
participation rates), those conditions are changing and strategies to
effectively mobilize non-participant populations and to recruit, train, and
retain employees will be needed. A number of key issues and conditions
present both opportunities and challenges for governments and LNG
employers, including the nature of regional labour markets; engaging
Aboriginal workers; worker migration and mobility; and issues related to
workforce transitions and career pathways for workers after peak LNG
construction activities have been completed.
Regional Issues In the province as a whole, although there is some labour market
slack, pressures will emerge in coming years. But LNG developments
must grapple also with the fact that many projects will occur in smaller,
Northern, and remote communities with unique regional labour market
challenges, including lower levels of labour market participation and
fewer workers overall. Even in cases where LNG projects are able
to recruit labour and skills in Northern and remote communities,
competition is likely to be “fierce” and could negatively affect other
businesses’ efforts to retain workers.12
For example, an environmental assessment for the pNW LNG project
notes that “the labour requirements for project construction would vastly
exceed the labour supply in the RAA [Regional Assessment Area].”13 The
project is expected to require 4,000 workers during peak construction,
but the RAA has a labour force of only 6,980—only 1,045 of whom were
12 Ibid.
13 Government of British Columbia—Environmental Assessment Office, Pacific Northwest LNG Project, 103.
A number of key issues and conditions present both opportunities and challenges for governments and LNG employers.
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unemployed and available for work (according to 2011 Census data).
In fact, the assessment estimates that only 200 workers will be drawn
from the RAA for the project. The remainder—indeed the overwhelming
majority—would have to be recruited from elsewhere in the province,
from other provinces, or from abroad.14 Other projects across Northern
and remote areas of B.C. will be in the same position.
Employing Aboriginal WorkersAt least part of the value proposition for LNG development is that it
has the potential to provide well-paying jobs for Aboriginal residents of
B.C.—particularly in Northern communities. Yet, historically, the labour
market participation of the Aboriginal population lags that of the non-
Aboriginal population. According to the 2011 National household survey,
among those aged 15 or older in B.C., Aboriginal people had a labour
force participation rate of 72.4 per cent, while that of non-Aboriginals was
79.7 per cent.15 (Unemployment for B.C. Aboriginals aged 25 to 64 was
14.7 per cent versus 6.1 per cent for non-Aboriginals).16 If Aboriginal
residents in B.C. participated in the labour market at the same rate as
non-Aboriginal residents (79.7 per cent), nearly 9,000 more workers
would be available.17
While this means that there is previously untapped labour available for
LNG development, it also means that strategies to mobilize, train, and
effectively engage with Aboriginal employees will be needed. previous
work by the Conference Board has identified some of the challenges
associated with engaging Aboriginal workers, including:
• difficulties in finding and reaching out to potential Aboriginal workers with
previously low labour market participation;
14 Ibid., 102.
15 statistics Canada, National Household Survey (NHS), 2011.
16 Ibid.
17 Calculations by the Conference Board, based on statistics Canada, National Household Survey (NHS), 2011.
LNG development has the potential to provide well-paying jobs for Aboriginal residents of B.C.
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• lagging educational and skills attainment relative to the
non-Aboriginal population;18
• reluctance of potential workers to move away from their communities;
• negative perceptions on the part of many employers and non-
Aboriginal colleagues about the skills, attitudes, and performance of
Aboriginal workers.19
While the precise strategies needed to engage with, recruit, train, and
support Aboriginal workers in LNG development will depend on local
conditions and discussions, some general principles can be identified:20
• Appropriate consultations among Aboriginal communities, governments,
and employers are a critical first step toward developing trust and
identifying how to achieve mutual benefits.
• Governments and communities can make efforts to increase both the
secondary and post-secondary educational attainment among the
Aboriginal populations, while employers can provide training that benefits
workers not only in their current roles, but helps to prepare them for
future roles.
• Existing Aboriginal employment organizations (e.g., Aboriginal skills and
Employment Training strategy [AsETs] Agreement holders) can share
best practices related to mobilizing and supporting Aboriginal workers
with each other and with employers to help engage Aboriginal workers
and provide mutual benefits.
• Cultural awareness programs can be developed and implemented to help
overcome racism and misunderstandings in the workplace that act as
barriers to valuing and benefiting from Aboriginal workers’ contributions.
18 see also Munro, MacLaine, and stuckey, Skills, 21–22.
19 howard, Edge, and Watt, Understanding the Value, Challenges, and Opportunities, ii.
20 Ibid.
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Worker Migration and MobilityRecruiting local and Aboriginal workers alone will not address the labour
needs of LNG construction and operation. Employers will need to look
beyond local and regional labour markets to recruit the labour and skills
they need. As the analysis above reveals, there is some slack in the
provincial labour market as a whole which can help, though pressure
should be expected during peak construction, creating a need to identify
and recruit labour from outside the province, and perhaps outside the
country as well.
Intra and interprovincial migration will require attraction and support
strategies. The experience of employers in the Alberta oils sands may
provide lessons for LNG employers in British Columbia. In the case of
Alberta’s oil sands, offering higher wages than found in opportunities
elsewhere in the province and country were a key part of successfully
attracting sufficient labour.21 Travel support and flexible shift scheduling
also eased the challenges for workers outside the region.
Where labour from elsewhere in B.C. and Canada is insufficient—
or where specialized skills are needed—there are opportunities for
employers to pursue immigrant workers or temporary foreign workers.
Given the short duration of the peak construction period in a medium
development scenario, recruiting temporary foreign workers may prove to
be a useful strategy. previous Conference Board research on the use of
temporary foreign workers in Alberta provides a number of insights and
strategies for B.C.’s LNG employers.22 In particular, it recommends that
employers and governments:
• Look close to home for skilled labour.
• But know that domestic sources are rarely enough to meet demand.
• Competition for foreign skilled labour may heat up.
• Employers, unions, and regulators must work together to eliminate
unnecessary barriers to worker certification.
21 Lewis, Alberta Oil Patch’s High Wages Attract U.S. Workers.
22 Dawson, Skills in Motion.
Intra and interprovincial migration will require attraction and support strategies.
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• It is not enough to allow temporary workers in—governments,
businesses, and unions need to work together to recognize
their credentials.23
Education and TrainingMany reports on LNG labour and skills have noted that there is a need
for investment in education and training to prepare potential workers for
employment. Key education and training needs will include expanding
and tailoring the apprenticeship system to accommodate not only
more apprentices in the trades—a key occupational category for LNG
development—but also the learning needs of remote and Aboriginal
workers. Additionally, because LNG development will require substantial
numbers of low-skilled construction workers, pathways from high school
to LNG employment should be clarified, and employers should be
prepared to provide significant skills, as well as occupational health and
safety training, to these employees.
The province’s B.C. Skills for Jobs Blueprint, the Natural Gas Workforce
Strategy and Action Plan, and the Conference Board’s work on skills
in B.C.—Skills for Success—provide a strong set of recommendations
and options to address education and training needs related to LNG
development.24
Workforce Transitions and LegacyOne final issue with which LNG employers and governments should be
concerned is the potential for employment in LNG construction to be
disruptive to the longer-term career success of some workers. some of
the environmental assessments for various LNG projects note that there
is the potential for low-skilled, well-paying construction employment to
draw some students out of school before they complete Grade 12 or
23 Ibid., 13–14.
24 WorkBC, B.C. Skills for Jobs Blueprint; petroleum human Resources Council of Canada, B.C. Natural Gas Workforce Strategy and Action Plan; stuckey and Munro, Skills for Success.
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some other educational credential. Because LNG construction is only
temporary, upon completion, those workers may find that their lack
of educational credentials impairs future employment prospects. One
promising strategy to avoid this is for employers to require job candidates
below a certain age (e.g., 19) to complete Grade 12 or its equivalent
before being hired. That would ensure that workers would be in a much
better position for future, post-LNG employment opportunities.
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CHAPTER 5
Conclusions
Chapter summary
• This report’s results are subject to uncertainty, as none of the LNG projects that were examined has progressed to the construction stage.
• While the final level of investment, capacity, and timing of projects is uncertain, what is certain is that the development of an LNG industry in B.C. would result in significant benefits for Canadians and their governments.
• The majority of economic development, employment opportunities, and government revenues would occur in British Columbia.
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This report examined the potential economic, fiscal, and employment impacts that might arise from B.C.’s emergent LNG industry. The results are subject to considerable uncertainty, primarily because the projects examined have not yet moved to the construction stage. This raises questions about how many projects might go forward, as well as the eventual liquefaction capacity. It also raises questions about the actual investments that would be made for any given level of capacity, primarily because the engineering-procurement-construction contracts have not yet been finalized. As a result, the findings of this report are based on the best available public information.
The findings presented herein assume an initial liquefaction capacity
of 30 MTpA, divided among three projects. There are several projects
currently identified that intend to start operations with two liquefaction
trains of approximately 6 MTpA each. There are also projects that
intend to start operations on a smaller scale, with only one initial train of
5 to 6 MTpA. Our reference case results are based on two large initial
projects, each with two trains of 6 MTpA and one smaller project with a
single train of 5 to 6 MTpA. potential expansions to these projects could
add another 24 MTpA of capacity should market development permit.
The investment profiles and economic impacts are shown by value chain
segment: liquefaction, transmission pipelines, natural gas processing,
and upstream activities required to ensure that natural gas production
is available. Each segment has its own expenditure patterns and timing.
For example, the liquefaction plants will expend large amounts of capital
before beginning operations, with their greatest impacts on services
industries, construction, utilities, and manufacturing. Once the terminals
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begin operations, the impacts on services industries remain strong, while
the other industries see reduced ongoing benefits. A similar pattern
occurs for natural gas transmission pipelines.
The impacts on the upstream sector (natural gas exploration and
production) are very different. The level of ongoing investment required
to maintain the natural gas supply to the liquefaction terminals is very
similar to the investments made in preparation for the first cargo of
LNG sent out. The upstream segment also shows a larger share of
investment and GDp generated in construction, manufacturing, and
utilities compared with services. This is true both initially and on an
ongoing basis.
The question of who benefits from the investments also provides
interesting answers. Each dollar of investment in the industry as a
whole generates approximately $0.76 in GDp for B.C. and $1.06 for
Canada. This smaller impact on B.C. is because not all of the
components are sourced within the province, or even within Canada.
This kind of import leakage is common for an open economy such as
Canada’s. The investments provide a significant boost to households’
disposable income, the single largest beneficiaries of the projects.
however, corporate incomes, personal income taxes, and indirect taxes
combined rise by approximately half of the total amount invested by the
industry. This is in addition to the resource royalties and LNG taxes that
are generated.
On the employment front, during the construction phase, the industry
would boost B.C.’s economy by adding between 55,000 and 93,000 jobs
in each year. Longer term, the industry will create approximately
33,000 permanent jobs. Over the total period examined, more than
1 million person-years of employment are created by the industry.
Governments would also benefit from LNG development. The total
impact on government revenues is estimated at $6.2 billion per year, of
which $3 billion (47 per cent) would accrue to B.C. and the remainder to
Canada. The fiscal impacts on other provincial governments or to other
levels of government are not included.
On the employment front, the industry will create approximately 33,000 permanent jobs.
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Although there is a great deal of uncertainty surrounding the number,
size, and timing of the projects that might proceed as the industry
continues to develop, there is certainty around the employment and
economic benefits that will occur. Our analysis of a 30 MTpA industry
demonstrates the following benefits:
• $7 billion average annual investment;
• $4.5 billion annual investment in natural gas production and processing
facilities that will remain near that level throughout the operations phase;
• $6.2 billion annual government revenues (on average), of which 47 per
cent accrues to British Columbia;
• $4.8 billion average annual boost to household disposable income in
British Columbia;
• a total long-term reduction of 0.5 per cent in B.C.’s unemployment rate
• creation of approximately 1 million person-years of employment in total
until 2045.
The industry would also require net migration into B.C., require labour
market adjustments to ensure an adequate supply of appropriately
trained and skilled workers, and boost inflation by almost a quarter of
a percentage point.
The regional impact of this industry is also important. Although the
terminals themselves will result in significant spending and employment
in the Kitimat/prince Rupert area, the majority of the spending will occur
in the upstream segment of the industry. The resulting impacts will be
long term, and will occur primarily in Northeast British Columbia.
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Appendix A | The Conference Board of Canada
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APPENDIX A
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