BC looks to LNG as an economic driver

GARY PARK

For Petroleum News

While the freshly minted Alberta government of Premier Rachel Notley struggles to keep its head above water as it faces a C$6.1 billion deficit in 2015-16, its neighbor on the west side, British Columbia, is expected to continue leading Canadian economic growth over the next two years.

But achieving that lofty goal is by no means certain.

The Conference Board of Canada is pinning its outlook on an assumption that Malaysia’s Petronas-led consortium will give the green light to building an C$11 billion terminal at Prince Rupert as part of its C$36 billion Pacific NorthWest LNG project.

Board chair Marie-Christine Bernard said that “although there is no guarantee that the project will go ahead,” her agency thought it was appropriate to comment on the possible boost to British Columbia’s construction, service and upstream drilling sector which could account for a full percentage point of the 3.6 percent growth forecast for the province in 2016.

As well as the liquefaction plant and tanker terminal near Prince Rupert, the overall Pacific NorthWest investment includes a pipeline and natural gas development by Petronas subsidiary Progress Energy, which has been spending C$2 billion a year in recent years to build up a supply of gas feedstock.

Despite evidence of a global glut of LNG that has cast a shadow over British Columbia’s hopes in the sector, Petronas Chief Executive Officer Datuk Wan Zulkiflee Wan Ariffin told the Malay Mail recently that Pacific NorthWest will proceed provided it receives environmental approval from the Canadian government.

The project makes the difference between British Columbia surpassing or just keeping pace with Ontario (2.3 percent) and Manitoba (2.5 percent), the next strongest growth provinces in the board’s forecast.

Although Alberta is expected to remain flat, overall Canadian economic growth is expected to pick up momentum, especially in trade-related sectors, because of stronger U.S. growth and a weaker Canadian dollar that will boost trade revenues.

While British Columbia has grounds for hope, Alberta can only hope.

That province’s Finance Minister Joe Ceci told a conference call that he is heartened mostly by some forecasts that say there’s nowhere to go but up.

“In some respects, people think we might be at the bottom of the trough and that things are going to be building and getting better.”

Not everyone shares that outlook, with Standard & Poor’s lowering Alberta’s credit rating to AA-plus from AAA, partly because of the New Democratic Party government’s refusal to adjust its plans, which include C$34 billion in infrastructure spending over the next five years - a commitment that has some critics accusing the administration of living in an unreal world.