As the first phase of the $18 billion LNG Canada project in Kitimat nears completion, speakers at the Indigenous Partnership Success Showcase on Wednesday urged provincial and federal governments to get behind the industry as a major contributor to economic reconciliation with First Nations.
In terms of direct foreign investment and job creation, Canada’s nascent LNG sector is unmatched, said Resource Works Stewart Muir. And Karen Ogen, CEO of the First Nations LNG Alliance (FNLNGA), said it is facilitating economic reconciliation with First Nations in a significant way.
“LNG has been a unique opportunity for First Nations,” Ogen said. “First Nations have acquired the resources to negotiate, advocate and write ourselves into the story of the largest industrial projects in Canadian history.
“LNG is a nation building project,” Muir said. “I challenge anyone to name me a private sector investment that has created this much foreign direct investment into Canada. And it’s not just one project – it’s multiple projects. Nothing like this is happening anywhere else in Canada.”
While the industry so far has proven a boon for First Nations, through things like impact benefits agreements, Canada has not fully capitalized on the opportunity the LNG industry presents, Ogen said.
She noted that, a decade ago, there had been as many as 20 LNG projects proposed for B.C. alone. Only two are in the construction stage – LNG Canada and Woodfibre LNG in Squamish.
Two other proposed LNG projects are both First Nations led – the Haisla’s Cedar LNG project in Kitimat and the Nisga’a Nation’s Ksi Lisims project.
“The first wave of LNG was not what it could have been,” Ogen said. “We in Canada have a lot more to learn about being competitive, as our LNG opportunity went south.
“I don’t doubt the sincerity of governments when it comes to the idea of reconciliation,” Ogen said. “But Canada and B.C. have not fully embraced the opportunity that LNG represents for First Nations.
“In fact, governments are focusing almost exclusively on emissions reductions, while lacking clear focus on how to generate economic benefits for indigenous people and communities, particularly rural and remote.”
To quantify the economic benefits of the nascent LNG sector, Resource Works and the FNLNGA commissioned Philip Cross, a former chief economic analyst for Statistics Canada, to try to come up with an economic impact analysis.
In a report made public today, Cross used Statistics Canada’s input/output model to conclude that for every $4.1 billion invested in the engineering and construction of an LNG project, a $4.5 billion increase in GDP would result, creating more than 35,000 jobs.
“The $4.1 billion figure is an estimate of the annual investment made by a large LNG project that ultimately may total tens of billions of dollars over the decade they often need for completion,” Cross says in his report. “So the $4.1 billion is not a one-time estimate of the benefits of investment spending, but an estimate of the benefit that will be repeated over many years.”
An investment of $4.1 billion investment in an LNG project would directly boost B.C.’s engineering construction industry by $1.8 billion, Cross estimated, and that would lead to spending of $1.4 billion on inputs from other industries.
“These inputs include manufactured goods needed to build the infrastructure, energy to power the machines, a wide range of business and financial services to manage the project and transport goods to where they are needed," Cross' report states.
“Finally, the boost to employment and incomes lifts consumer spending by a further $1.2 billion.”
Craig Hallden, corporate relations manager for LNG Canada, said the project in Kitimat has employed 30,000 people, to date, 10 per cent of whom have been indigenous, and has pumped $4 billion into the local economy through contracts for foods and services with local and indigenous businesses.
The question now is whether the partners behind LNG Canada will sanction a second phase expansion of the project.
Ogen said there is a demand for Canadian LNG in Asia.
“We have Vietnam, we have a lot of Asian countries, coming to us saying we need your LNG,” she said.
Indeed, the London-based energy market analysis firm Evaluate Energy produced a Tuesday that notes B.C. LNG projects’ distinct advantage in serving the Asian market.
“Although the global LNG market is currently balanced, new Asian importers and accelerated coal-to-gas switching in China are expected to create more demand in the second half of the decade,” the report forecasts.
It notes that the shipping costs from B.C. to Japan are estimated to be US$1 to $1.09/MMbtu (million British thermal units), compared to US$2.40 to $2.45 to ship to Japan from the Gulf Coast.
“The Japan Korean Marker (JKM) — the Platts assessment of delivered spot LNG prices to Northeast Asia — averaged US$14/MMbtu last year,” the report states. “Canadian projects could have a significant advantage over US Gulf Coast projects at this price level.
“And the lower the JKM price, the more competitive Canadian LNG becomes. Buying interest from Asian emerging markets tends to emerge at under US$10/MMbtu, according to analysts, a price point LNG exporters from US Gulf coast projects may struggle to deliver at.”
