B.C. LNG project could create 'gold rush' for Alberta petrochemical industry

A new report co-written by Gil McGowan, the president of the Alberta Federation of Labour and co-chair of Alberta's energy diversification advisory committee, suggests the province could reap an economic bonanza from the LNG (liquefied natural gas) export facility being developed in northern British Columbia.

McGowan spoke to David Gray about the report on the Calgary Eyeopener Tuesday. This interview has been edited for clarity and length.

Q: Why is this such good news for Alberta?

A: It's obviously good news for B.C. and especially for natural gas producers up in the northeast part of their province, because the [LNG Canada] project will include a pipeline from Dawson Creek down to Kitimat, where there'll be Canada's first liquefied natural gas facility that will export LNG primarily to China.

The untold story,  which we highlighted in our report to government, is that it could open the door for unprecedented economic diversification in Alberta. In fact, one of the main conclusions of our report was that if West Coast LNG becomes a reality, which is happening right now, then Alberta's petrochemical industry could literally double its output.

Q: How so?

A:  It's important that Albertans understand that West Coast LNG matters for Alberta, because our petrochemical industry here in Alberta, which is a $20-billion-a-year industry, uses what we call natural gas liquids as their feedstock.

Natural gas liquids — which consist of primarily ethane and propane — constitute only about eight per cent of what comes out of the ground when you drill for natural gas.

The rest, 92 per cent, is methane. So if you want to take advantage of our province's natural gas liquids — and they are plentiful and they are cheap — and if you want to use them to expand Alberta-based petrochemical manufacturing, we need to find what the people in the industry say is "a home for the methane."

The West Coast LNG provides exactly the kind of outlet that we need.

Q: What kind of jobs are we talking about?

A: We're talking about the full range of jobs that have driven our economy forward: engineering, project management for people in downtown offices in Calgary, people who plan major industrial projects. But we're also talking about construction jobs, and then operation jobs and spinoff jobs. What I said was, the prospects are huge. So the question is, how huge?

What we're projecting is that — with this new outlook for methane that allows us to pull more natural gas liquids out of the ground and turn those into valuable products — we could literally double the size of our petrochemical industry, turning it from a $20-billion-a-year to $40-billion-a-year industry in 20 years. And that's going to create thousands of construction jobs.

Q: What does the Alberta government have to do to make it happen?

A: Through the work of our committee, we met with dozens and dozens of industries — not just Canadian, but from around the world. Petrochemical companies are literally lining up for the opportunity to invest in Alberta, mostly because our natural gas liquids are cheap and plentiful, which gives us a huge advantage.

The only area where we're a little bit behind other jurisdictions is in terms of our up-front capital costs, where we're about 10 per cent more expensive than other jurisdictions. So what we recommended was that the government make equity investments, to the tune of about 10 per cent, put that on the table, either as royalty tax credits or equity investments, to get those investment decisions over the top.

Companies said if that were provided, they would invest the money.

In our modelling, we suggested that with these kinds of incentive programs — which, by the way, exist in basically every other petrochemical jurisdiction in the world — there would be a gold rush of investment.

Q: What sort of numbers are we talking about?

A: We're estimating between $60 [billion] and $100 billion over 20 years that would double the industry.

It would create jobs not only up-front but, most importantly, it would create long-term jobs. We think it would sustain 100,000 extra jobs in the Alberta economy going forward, every year, because when you build industrial plants, you're creating jobs in operations, creating ongoing jobs in maintenance — and the spinoffs.

So it's a win-win situation. It's great for B.C., but it could open the door for unprecedented diversification in our downstream sector of our oil and gas sector.