Imagining Oil and Gas in B.C.

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Oil and gas in B.C. | BCBusiness
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To the oil and gas industry, B.C. is virgin ground ripe for development. The governing B.C. Liberal party has staked its future on building a robust natural gas infrastructure. Meanwhile, First Nations have voiced concerns and citizens are weighing the environmental risks. Hyperbole and rhetoric aside, what exactly is at stake and what would an expanded oil and gas industry look like to the average British Columbian?

Matt Sunderland resisted working in the Alberta oil sands for years. A high school friend kept offering him a position with Ledcor, an international construction firm, but Sunderland enjoyed being a stay-at-home dad, picking up the occasional renovation gig. With his wife Becky’s job at Canada Post, the couple made enough to own a house and raise four girls in Courtenay, in the Comox Valley on Vancouver Island’s east coast. “We have no debts besides a mortgage,” he says.

But the allure of fat paycheques was getting harder to resist. Sunderland noticed more and more people in Courtenay commuting to work in the oil patch, two or three weeks on, one week off. Basically the same amount of “weekend” but two or three times more money. The only cost was not being home every day. “We talked about it a lot,” he says. “Can our family handle it?”

In July 2012 he finally took his friend up on the offer. “In the end it came down to being able to put a big chunk down on our mortgage,” he says. “It will make it easier to eventually come back to work in Courtenay and not feel stressed about how much work I have to find every month.”

The money is already adding up. In Courtenay he could charge about $25 an hour, while in Alberta he earns $36 an hour plus overtime, which accounts for about half his hours because he’s working 12 hours a day for two weeks straight.

“I make more in a seven-day paycheque than I could in a month in Courtenay,” he says. And almost all of it ends up in the Vancouver Island economy, since Ledcor pays for his food and accommodation and includes $650 per shift in travel allowance, enough to get to and from the job. “Besides the odd beer in the lounge, I don’t really spend money up there,” Sunderland says.

Sunderland’s experience represents just a hint of the riches B.C. has already reaped during the current energy boom involving both the oil sands of Alberta and the natural gas fields of northeast B.C. Of course, oil booms are nothing new to Albertans and the good times have typically trickled over to B.C., thanks to transient workers like Sunderland. However, this time around it’s more than just a spectator sport for British Columbians; a staking rush is currently on to build a permanent infrastructure for a homegrown oil and gas industry.

Alberta faces a problem getting its product to market. A July 2012 study published by the Canadian Energy Research Institute estimates that production from the oil sands will grow from 1.5 million barrels a day in 2010 to 5.3 million by 2030; meanwhile existing transportation capacity from the oil sands will reach maximum capacity by 2015. “There’s significant growth in the oil sands driven by a demand for crude products,” explains Travis Davies, a spokesperson for the Canadian Association of Petroleum Producers. “We need more infrastructure to move the product to where the demand is. The pipeline industry is charged with reacting to that demand.” And that’s where B.C. comes in beyond simply supplying temporary workers to the Alberta oil patch: two current proposals would bring Alberta oil through B.C. to coastal ports, mostly to access export markets on the Pacific Rim.

Calgary-based Enbridge Inc.’s Northern Gateway pipeline would carry an estimated 530,000 barrels of oil a day from near Edmonton to Kitimat, a port town east of Prince Rupert, for export to markets in Asia and California. Houston-based Kinder Morgan Inc. wants to more than double the capacity of its existing Trans Mountain pipeline between Edmonton and Burnaby to 450,000 barrels a day, mostly to access export markets, but also to feed some unfulfilled capacity at Chevron’s Burnaby refinery. According to the companies, the proposals are worth a combined $9.6 billion.

Meanwhile, even more money is at stake in B.C.’s emerging natural gas industry. From Dawson Creek to Fort Nelson, billions are being invested in unconventional gas projects where horizontal drilling and fracking – using chemicals and steam to crack rock formations – are uncovering huge reserves of gas. This technology has also opened up new gas fields in the U.S., flooding the North American market with supply and driving the price down, especially compared to Europe and Asia.

Located at the supply end of natural gas pipelines – whether to Montreal, California or Washington state – B.C. suffers its own problem getting its product to market, says Steven Paget, an oil and gas infrastructure analyst for FirstEnergy Capital Corp. in Calgary: it faces high production and shipping costs to access a low-price market. But get that gas on a ship and the economics change. “Now there’s the possibility of putting the gas in a short pipe and then to China, where a producer can get three times the price,” he says. “That’s pretty attractive.”

Thus, in addition to the oil pipeline proposals, three consortiums are proposing to build gas pipes across B.C. to Kitimat and Prince Rupert, where natural gas could be liquefied and loaded onto specially designed liquefied natural gas (LNG) tankers. Together these projects represent an even bigger infrastructure investment than the proposed oil pipelines, according to Paget’s research: about $12 billion for three pipes, more than $30 billion in five liquefaction plants and billions more in new exploration and well development to feed them.


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