Diversification, certainty keys to successful BC economy
Northern BC’s resources create wealth for all of British Columbia, and those natural resources – oil and gas, forestry and mining – are the bedrock of the Canadian economy. In fact, one need look no further than the TSX, where three-quarters of the companies listed are natural resource companies, to see proof of its importance to the Canadian economy.
The world is hungry for the resources that Canada and British Columbia have, Kevin Hirji, Newmont Corporation’s Principal Advisor, External Relations for North America, noted when he moderated the Economic Development in Western Canada panel at the recent BC Natural Resources Forum in Prince George.
“They need our gas to reduce their carbon emissions, they need our forestry products for low-carbon building materials, and they need our critical minerals for electrification and technological advancement,” Hirji said.
The panel – calling on the knowledge of representatives from Petronas, Altagas, and the Prince Rupert Port Authority – discussed the future of energy in BC and Canada, the challenges it faces and how to overcome these challenges to create a prosperous future for the natural resource industry and resource communities.
Petronas and Altagas have substantial investments in northeastern BC’s Montney Basin, a world-class asset which produces the cleanest, most low-carbon natural gas in the world. Both companies export natural gas products from the region to Asia. Altagas is the largest conduit of propane and butane exports out of Canada to Asia, which is a growing market for Canadian LPGs, while Petronas is a major partner in LNG Canada.
As part of their commitment to the region, Altagas is in the process of expanding export capability, with the Ridley Island Energy Export Facility (REEF) in Prince Rupert. Once that’s up and running, Altagas hopes to have ability to export couple of hundred thousand barrels a day of propane and butane to Asian markets, according to Altagas president and CEO Vern Yu.
These companies are among a dwindling number willing to invest in British Columbia in recent years. In 2016, there were more than 15 petroleum industry project proposals on the books, including the Northern Gateway Pipeline which would have brought heavy Alberta oil to the Pacific Future Energy refinery proposed for Kitimat, destined for Asian markets. Today, only one of those projects, LNG Canada, is close to sending any product to market.
“We’ve seen significant exodus of capital out of British Columbia and Canada over the last number of years, and yet we have a growing demand, particularly for natural gas and LNG in the Asian markets,” said Shannon Young of External Relations and Sustainability with Petronas.
Many of the projects were proposed for around Kitimat and Prince Rupert, Canada’s third largest port by value of trade, at approximately $60 billion worth of trade, and supports almost 4,000 direct jobs.
Prince Rupert is a strategic gateway with a trade-enabling suite of infrastructure that supports Western Canadian trade in Asian-Pacific region. That trade benefits communities like Prince George, Fort St. John, Dawson Creek, and Edmonton, according to Shaun Stevenson, president and CEO of the Prince Rupert Port Authority.
The port authority is looking at investing $3 billion in capital investment to facilitate an ambitious expansion plan, Stevenson added.
Today, the port anchors trade between Canada and Korea, China, Japan and beyond. Stevenson says they’re seeing shifts in manufacturing away from China to places like Vietnam, and as the closest port to Asia, there’s tremendous opportunity to pivot to new markets.
Through metallurgic coal, agricultural products, forest products and growing energy exports, Stevenson sees Prince Rupert’s role growing in what he says is a time of economic transition and renaissance.
“All of that represents not just employment in terminaling and the supply chains that are necessary to enable market access, but the real torque in those industries creating and contributing to the economic vitality of the communities in which those industries reside in northeast BC,” Stevenson said.
“As we look to the dynamic facing BC’s economy and the natural resource economy that anchors the vitality of the province and the threats that it’s under right now, with the changing US administration, the role of the Port of Prince Rupert going forward is going to be critical to ensure that we’re up for the challenge that represents and we can fully realize the benefits of our natural resource sector in northern BC.”
The chief among those benefits is to provide affordable energy to the people who need it.
“You need energy to live your day-to-day life. You need energy in the form of natural gas and LPGs to cook your food, heat your house, and to have the electricity and all the other creature comforts that you’re used to,” said Yu.
“[Altagas’] job is to provide that energy to the end user, whether it’s a global customer or whether it’s a customer in Canada, or whether it’s a utility customer of ours in United States in a manner that’s affordable, reliable, and more and more, less carbon intensive.”
Altagas predominantly exports propane and butane to Asia, and with the potential for tariffs coming from the United States, Yu says that gives his company – and the industry as a whole – the “impetus to further expand our business and diversify Canadian markets into Asia.”
Young agreed, noting that although LNG Canada is a great first step, there is a demand for more.
In Malaysia for example, 45 percent of the power grid is still fuelled by coal. The demand for LNG is there, she said with 65 percent of imports globally are going into that Asian market, and an anticipated 5 percent growth in demand annually.
“The market demand globally is being filled, but not by Canada, and that has to change,” Young said.
“When we look at the risks of relying on a single market, like the US and how vulnerable we are to being like a trade war, I think it really drives forward how we have to move forward and be able to move forward at pace.”
The focus on the climate in the form of emissions caps, carbon taxes and other policies has put affordability and security of supply in jeopardy, both at home and in markets abroad.
To further develop British Columbia’s access to the Asian market, businesses need to know whether that market is willing to pay more for Canada’s cleaner, certified gas, what Young calls “greenium”.
“We’re continuing this commitment, we’re not seeing the greenium, and that’s why it’s so important that Canada continues to be cost-competitive, and that we’re not layering additional costs, additional policies, emissions caps – that has to stop if we want to play in the global market.”
While Yu noted that a tariff war wouldn’t be good for consumers in either Canada or the United States, he anticipates that the whole thing will blow over. However, diversification for the future is still important.
“If you’re highly dependent on one customer, even if it’s a good customer, you need to make sure you have other options,” Yu said.
Permitting across many industries is a problem that’s putting BC and Canada in a very vulnerable position through the potential US tariff issue. Coordination between the provinces and the federal government is critical.
“[Government needs to] Focus on what can we do within our domestic regulatory framework within British Columbia to help drive that diversification. That’s really the focus on permitting,” said Young.
“We’re seeing strong leadership from the premiers and the faster we can get to a federal election the better, to have that stability.”
Most of the projects that are both planned and almost complete are multi-year projects, so businesses need to know that the government is also taking a long-term view.
To invest strategically in infrastructure, projects must have certainty on regulatory approval timelines, so that companies can secure the capital required to build them.
Canada’s trade contributes to the prosperity of every individual resident of Canada, Stevenson pointed out.
“That’s been sorely lacking. The opaque and uncertain regulatory processes have put at risk capital that wants to come to Canada. I think that long game – you see with the opening of TMX, we have choice now – that will ultimately give us better deals on our trade into the US, and expose us to a global market opportunity,” he said.