If there is one thing B.C. Premier Christy Clark has remained steadfastly optimistic about, it's the prospect of a bounty of riches from a nascent liquefied natural gas industry. And she has kept the faith even while struggling to get even a single company to sign on.
The Premier's unshakeable goal remains three LNG plants up and running by 2020, even though it's difficult to find an industry analyst anywhere who believes that will happen. If anything, the worldwide collapse in the price of oil has made it even more unlikely.
It was noted that there was little mention of LNG in last week's Speech from the Throne, a marked departure from the past few addresses where it featured prominently. Nor is it expected to be highlighted much in Tuesday's provincial budget. Last year, the government introduced the tax regime that LNG proponents will be obligated to adhere to. This year, it will be the federal budget that those same multinational outfits will be studying, looking for any changes to the corporate capital tax rate in Canada that could impact their LNG calculus.
For Ms. Clark, meantime, it's now mostly a waiting game.
"I'm still very, very confident we'll get to three by 2020, but I think the order in which these projects go ahead is going to change probably because a lot of these companies are cross-invested," Ms. Clark said in an interview.
And those "cross-invested" in the oil business, in particular, have had their bottom lines kicked hard in recent months. The Premier suggested there is even more pressure on those companies that are state-owned, where the government relies on dividends from oil revenues to finance programs and services.
"They're looking at their total income and they're saying, 'Wait a minute, where's our oil income?' And that's affecting decisions they're making on the gas side."
In this instant, she would be talking about Petronas, the Malaysian-owned energy giant that is behind the bid from Pacific Northwest LNG Ltd. It is generally accepted to be the company furthest along in terms of making a final investment move. But now it seems the slide in the price of oil has created a political dynamic back home that evidently will delay that decision.
But now it seems the slide in the price of oil has created a political dynamic back home that evidently will delay that decision.
Still, the Premier said others exploring multibillion-dollar LNG ventures in the province are not burdened by those same political realities.
"Companies like Shell and Exxon are long-term thinkers, are untouched by politics, and they've lived through many of these cycles and they've got very, very deep pockets," she said. "In Shell's case they are absolutely 100 per cent on target. They haven't backed off one iota and Exxon is moving forward way faster, a lot faster, and getting very aggressive about getting into the market as quickly as they can."
Perhaps the Premier knows something others don't. The prominent U.S. research and brokerage firm, Samuel C. Bernstein and Co., recently suggested there were likely only going to be two companies breaking LNG ground in British Columbia in the near term: Shell in 2021 and Chevron by 2023. And that was barring any further unforeseen obstacles appearing on the horizon.
The fact is the drop in the price of oil has not just affected the LNG dreams of companies such as Petronas. There seems little doubt that LNG buyers in Asia are going to re-evaluate their energy supply options in this low-oil-price milieu. On top of that, there is currently weak LNG demand and an abundance of supply, with eight new LNG projects in Australia set to add to that global capacity soon.
But Ms. Clark says there couldn't be a better time to commit to LNG in the province, with a lower Canadian dollar being good for capital investment.
On top of that, she said, the dire situation in Alberta is freeing up a lot of skilled labour, workers who would be happy to make the short jaunt to British Columbia to regain employment. This phenomenon could also help neutralize the wage inflation many expected a skilled labour competition with Alberta would touch off.
"We've done what we've needed to do," Ms. Clark said.
"We've set the tax framework, we've set the environmental frameworks, we've got most of the First Nations stuff through, although we still have work to do. But we've moved most of the big boulders.
"Now it's up to the companies to make their decisions."
Gary Mason