| || ||Len Coad |
Director, Energy, Environment and Technology Policy
This Op-Ed was featured in the The Vancouver Sun.
December 27, 2012—The future of Canada's natural gas industry depends critically on investment in exploration and production. Nowhere is that investment more pivotal than in British Columbia, which is poised to take a leading position in the Canadian industry. Alberta’s conventional production is in long-term decline, and the shale gas revolution in the United States is expected to transform Canada’s long-standing export pattern.
British Columbia is sitting on a potential windfall of natural gas. Whether the province fully taps this potential depends on the decisions it takes to enable investment and production, while ensuring that environmental protections keep up with the pace of development.
British Columbia is expected to attract almost half of all investment in natural gas in Canada over the next 24 years. The Conference Board of Canada’s newly-published report, The Role of Natural Gas in Powering Canada's Economy, estimates that $181 billion (2012 dollars) in investment will occur in the province between 2012 and 2035—more than $7.5 billion per year on average.
This investment outlook– the largest by province—would, if realized, see B.C. surpass Alberta in investment, and it would account for an increasing share of Canada’s natural gas production.
Based on this level of investment, B.C.’s production is forecast to grow by two-thirds between now and 2025. This growth is based primarily on the availability of unconventional shale gas, as well as the opportunity to export liquefied natural gas (LNG). Although Canada does not currently export LNG, efforts to develop new markets for Canadian natural gas have targeted demand in Asia.
Several companies have announced plans for LNG liquefaction plants, pipelines, and/or export facilities in British Columbia. The Conference Board analysis, however, does not assume that all projects will proceed. For this research, the Conference Board assumed that LNG export market is expected to grow from zero to 20 million tonnes per year (about 1 tcf/year), which would still be significant growth in a relatively short timeframe.
Nevertheless, British Columbia faces twin challenges of developing both shale gas production and the infrastructure to deliver LNG exports to markets. In this context, the regulatory frameworks will have a decisive impact on whether this investment takes place.
While natural gas is a clean-burning fuel that results in fewer greenhouse gas emissions than other hydrocarbons, the technological process of shale gas extraction is the subject of controversy for its environmental impact. As shale gas production in B.C. expands, the regulatory framework will need to be updated regularly to ensure that the environmental protections in place are effective, and that the cumulative effects of all projects are properly managed.
If the estimated investment is realized, British Columbia will gain more than $116 billion in real GDP over the next quarter century. It will create a cumulative 1.3 million person-years of employment through direct and supply-chain effects—effectively supporting roughly 54,000 jobs annually. The investment in British Columbia is expected to lead to more than $46 billion in tax revenues in B.C. over 24 years (not including royalty payments).
And providing natural gas to Asia through LNG exports would introduce a new, vibrant market for the industry. Because of booming U.S. shale gas production, Canadian exports to the U.S. could all but dry up by 2035. For Canada just to maintain consistent production levels over the next 25 years, British Columbia’s gas resources will need to be developed along with the infrastructure to deliver it.
The opportunity is at our feet. Overall, natural gas investment is expected to contribute $940 billion to the Canadian economy over the next 25 years. How British Columbia develops its gas industry holds the answer to a $1 trillion question for Canada.