Separating Rhetoric from Reality – Part I (cont’d)
for the LNG industry prior to the finalization of all of the
relevant details. It has also provided negotiating flexibility
between government and proponents.
The question is not whether there are significant economic
benefits to be reaped from LNG development (there
clearly are), but rather about their magnitude and timing.
Ultimately, whether the direct government tax value of
future LNG development ends up closer to $20 billion
or $100+ billion,5 it’s clear that the fiscal upside for the
province is substantial.6
While critics can question the government numbers, the
reality is that much of the fiscal benefit will be determined
not by government, but by the global marketplace for LNG.
LNG in the Global Marketplace for
Globally, natural gas is going through an adjustment phase
as the shale gas revolution transforms traditional regional
supply and demand dynamics, driving price differentials
that have opened up attractive market opportunities for
natural gas exports into Asia.7
The Asian marketplace is in a very dynamic phase for natural
gas import planning and supply option analysis, which
creates some urgency to ensure that BC’s supply options
are fully and fairly explored.8
Importantly, and also linked to this analysis, BC (and
Alberta) faces significant risk from continental
natural gas prices that are likely to remain
relatively flat for a decade or more as the
implications of the North American shale gas bounty are
priced into the domestic market.
The current phase of active planning by Asian energy
importers will not last forever – even if natural gas demand
in Asia continues to grow over time. As the recent RussiaChina natural gas trade agreement highlights, long-term
energy import decisions are being made now.
Taken in combination, there are clearly a series of marketdriven imperatives that underpin the sense of urgency
around LNG policy development in BC, and a real, marketdriven urgency to advance the LNG opportunity in BC as
various Asian energy-importing countries take steps to
secure energy supplies for the future.
Conclusion – A Bright Economic Path
Overall, we believe there is a solid economic fact base
supporting the view that LNG development will be positive
for BC economically and essential to realizing the benefits
of the province’s vast shale gas resources over the short,
medium and possibly long term.
Based on our analysis of both current and predicted
private sector investment activity, there is little doubt BC
is benefitting from LNG development now, with a strong
possibility for transformational growth in the near future.
LNG and natural gas development hold real promise for
sustained benefits over the medium to long term across
many key metrics. In fact, we believe that slowing the pace
of LNG development at this stage, as some critics suggest,
would significantly disadvantage the province.
While the majority of LNG critics tend to focus mainly on
environmental matters, the purely economic arguments
against LNG development in BC are weak, in our view.
Critics would contribute more to the economic aspects of
LNG policy debates by focusing on global competitiveness
challenges as well as domestic distributional issues –
such as looking at First Nations and community-level
benefits, infrastructure needs, downstream diversification
opportunities, and the potential structure and governance
of the proposed Prosperity Fund.
To read the original version of this article, visit www.bcbc.
This situation is brought about by a number of factors: LNG
contract cycles, major capital deployment choices between LNG
and pipelines, geo-political tensions, and climate/air pollution
The $20 billion is a “low” scenario put forward by the CCPA; $100
billion is a figure proposed by government as part of the analysis
tabled with the 2013 budget and undertaken by Ernst & Young.
Even assuming a modest build-out of the sector, the investment
levels would be unprecedented.
This price differential is well explored in many other assessments.
I N D U S T R Y U P D AT E
Tom Syer is the vice president of policy and
communications at the Business Council of
Jock Finlayson is the Business Council of British