About That $20billion LNG Investment


We are blanketed with feel-good ads from the  Clark government which include a shiny figure of $20 billion already invested in LNG in BC. What are we to make of it? How was this figure arrived at and how has the money been spent since mostly we see no sign of it? I have some answers, thanks to an engaged reader.. What I hope to show below is the case for the Advertising Standards Council of Canada to shut down these ads, because they are manifestly misleading. Specifically, a reader of mine is looking into complaining to the Ad Council based on Clause 1 of the Canadian Advertising Standards Code, which follows below.

1. Accuracy and Clarity

In assessing the truthfulness and accuracy of a message, advertising claim or representation under Clause 1 of the Code the concern is not with the intent of the sender or precise legality of the presentation. Rather the focus is on the message, claim or representation as received or perceived, i.e. the general impression conveyed by the advertisement.

(a) Advertisements must not contain inaccurate, deceptive or otherwise misleading claims, statements, illustrations or representations, either direct or implied, with regard to any identified or identifiable product(s) or service(s).

(b) Advertisements must not omit relevant information in a manner that, in the result, is deceptive.

(c) All pertinent details of an advertised offer must be clearly and understandably stated.

(d) Disclaimers and asterisked or footnoted information must not contradict more prominent aspects of the message and should be located and presented in such a manner as to be clearly visible and/or audible.

(e) Both in principle and practice, all advertising claims and representations must be supportable. If the support on which an advertised claim or representation depends is test or survey data, such data must be reasonably competent and reliable, reflecting accepted principles of research design and execution that characterize the current state of the art. At the same time, however, such research should be economically and technically feasible, with due recognition of the various costs of doing business.

(f) The advertiser must be clearly identified in an advocacy advertisement.

A few months ago I noticed a tweet from Kathy Tomlinson of the Globe and Mail which said government, when asked, had declined to elaborate on or justify the figure. Now it has, to a point. What follows has been provided by a reader in correspondence with a civil servant from Government Communications and Public Engagement (the propaganda arm of government):

Below is a table that highlights the companies and their investments to date:

 

COMPANY INVESTMENT $ DETAILS DATE
Acquisition
Mitsubishi Corp.

 

(EnCana)

$2.9 billion Joint-venture deal. Mitsubishi 40% interest in EnCana’s Cutbank Ridge (Montney) assets. EnCana remains operator February 2012
PetroChina (Shell Canada) $1 billion Joint-venture deal with PetroChina purchasing 20% interest in Shell’s Groundbirch assets (Montney) February 2012
INPEX

 

(Nexen)

$1.14 billion 40% participating interest in the shale gas projects in the Horn River, Cordova and Liard basins from Nexen Inc. August 2012
Chevron $1.3 billion Acquired a 50% operating interest in Kitimat LNG, the proposed Pacific Trail Pipeline, and a 50% in natural gas rights in the Horn River and Liard Basins December 2012
Progress Energy $1.5 billion An agreement to acquire interest in two partnerships from Talisman Energy Inc. November 2013
JAPEX $0.54 billion 10% interest in North Montney area April 2013
Woodside $1.07 billion Acquired a 50% operating interest in Kitimat LNG, the proposed Pacific Trail Pipeline, and a 50% in natural gas rights in the Horn River and Liard Basins April 2015
Expansion
FortisBC $0.06 More than $60 million in committed local spending June 2016
Upstream
Various (upstream) $3 billion Total capital investments in upstream = $5.2 billion1 57%2 of $5.2 billion = $3 billion estimated for LNG 2012 year
Various (upstream) $3.4 billion Total capital investments in upstream = $5.7 billion1 60%2 of $5.7 billion = $3.4 billion estimated for LNG 2013 year
Various (upstream) $3.2 billion Total capital investments in upstream = $7.3 billion1 44%2 of $7.3 billion = $3.2 billion estimated for LNG 2014 year
Various (upstream) $2.4 billion Total capital investments in upstream = $5.0 billion1 48%2 of $5.0 billion = $2.4 billion estimated for LNG 2015 year
TOTAL $21.5 BILLION+

Here are the things that stand out and pretty much scream for further analysis with my simple blogger questions at the end:

1- 9.32B of the $21 billion investment listed here is for acquisitions of stakes in projects. Companies are buying future interests in essence from each other. Notice the acquisitions of stakes in Kitimat LNG, a project which is on indefinite hold due to the world-wide supply glut and low prices. All approvals have been issued, but no building is happening, no final investment decision has been made, no workers are being employed on the ground, and there are no customers for the product anxiously awaiting delivery.

Most of the money under acquisitions is from 2012.. Comparatively little has been happening since.

We were promised a plant up and running well before 2017. Now the timeline seems to be 2024 at the earliest, though there is a slim chance that Woodfibre’s small project at Squamish may get built earlier.

2- $60m has been invested by Fortis in local spending. Excellent. Fortis supplies the natural gas that heats my living room fireplace in a snow storm. Fortis, I believe, will supply the new ferries currently lumbering this way from Poland.

3- Upstream capital investment, a total of $12B , is pro-rated somehow. A percentage of activity in the northeast of the province has been assigned as “LNG export” related for the years 2012-2015.

The dollar figure assigned ranges from a high of 3.4 billion in 2013, to a low of 2.4 billion in 2015.  The percentage assigned? High of 60% in 2013 down to 44% the year after.

Questions:

1- With companies buying stakes in each others future projects, how can this be considered investment in BC? Are they not placing bets and hedging bets? This is not money that is circulating through the economy, and it’s not creating very many jobs here. It’s money being traded between corporate offices, most of them offshore,  to share risk and bide time.

2- With no LNG projects currently being built, and only one (Woodfibre) having reached anything like an FID stage, how is it that we can estimate a percentage as high as 40-60% of capital investment being LNG export related? The only export facility that currently exists is decades old (Tilbury).  All the rest are in a buy and hold pattern… any push to build them awaits a rise in the market price and the end of this worldwide glut… In other words, this is all indefinitely in the future.

Surely government must justify this calculation somehow. Here is where the figures came from according to GCPE ..

”  Annual capital investments in upstream sourced from CAPP’s Statistical Handbook and only includes expenditures for exploration and development (excludes operating expenditures and royalties)

  • Estimated from B.C. Oil and Gas Commission’s drilling statistics and considers rigs released by companies involved in the development of the LNG industry in British Columbia”

Pretty clearly,  the figures on drilling statistics and rigs being operated today bear no relevance whatsoever to dream projects which are at least 5-7 years in the future. The companies doing the drilling today are not doing it for LNG export.

Expenditures for exploration and development may have some use, even looking at a ten year timeline, but those are not separated in any useful way.

My reader had follow up questions as well, which so far have gone unanswered :

Please provide further details and breakdowns of sources of the estimates in the est $12bn upstream benefits and how they directly relate to investment in BC LNG. This upstream section alone accounts for over half of the advertised commitment and is suspect and misleading without further details.

– Please advise if the 2 noted acquisitions by Chevron and Woodside for 50% operating interest of Kitimat LNG are for separate percentages or include any transfer of assets between them that is being accounted for twice.
– Please provide further details of FortisBC expansion and how it directly related to LNG alone vs other local spending
– Please provide confirmation that Progress Energy’s agreement to acquire interests from Talisman actually resulted in a confirmed acquisition, and that those partnerships are directly related to LNG in BC.

Government advertising is meant to be informative to the public and serves a useful role when it is. These $20 billion LNG ads perform the opposite function.

 

11 thoughts on “About That $20billion LNG Investment”

  1. If a company buys an interest, another company must have sold that interest. Why aren’t the BC Liberals advertising that companies have been divesting LNG interests in BC?

  2. Petronas owns most of Progress Energy. Bought it in 2012 for about $5.5 Billion, but likely because the transaction took place in Alberta, not listed here. No doubt Petronas’ interests are heavily included in the nebulous “various upstream” category.

    I wonder if, each time a company “invests” in BC by trading or outright buying stakes in another company, the BC Liberals ante up some sort of additional development subsidy even though the actual ground operation doesn’t change?

  3. Much of the infrastructure spending is returned through Minister Coleman’s very generous “royalty credit” programs. It isn’t clear if the “investments” are net of those or if they are included in the pumped up total. And it cannot be understated that all the gas being produced now less the amount that Fortis liquefies at Tilbury is sold through the existing pipeline infrastructure to markets in the US Midwest thought the Alliance system, and the US Northwest through the Spectra(soon to be Enbridge) System and the southern crossing at Yahk(TransCanada) system. Some gas also goes east out of BC and and enters the TransCanada(novagas) system and makes its way to eastern Canadian markets.
    For all the hype LNG has produced very little provincial,revenue and won’t for a very long time.

    1. Exactly right. Especially important – your last line . “For all the hype LNG has produced very little provincial revenue and won’t for a very long time”.

  4. I appreciate your effort Merv…..CBSC…

    I filed a CBSC complaint against Christy Clark years ago, when Clark was on CKNW…

    Christy Clark was cheerleading for the $million dollar man David Hahn….

    Christy Clark stated, on air…”BC Ferries under David Hahn is bringing in $500 million per year in profit…..BC Ferries never made this money until David Hahn took over BC Ferries”

    I challenged Christy Clark on air(I called in)..I sent her link after link proving Christy Clark was a liar…I demanded she retract her outrageous claim…She mocked me..refused..

    I filed a complaint with the CBSC ….I won…Christy Clark was forced to retract…

    Her retraction was unannounced, and subdued….months later, on a Friday …Christy Clark’s retraction was, went something like this..

    “I noted that BC Ferries made $500 million per year in profit, that’s not true, they don’t book their revenues like that”

    End of retraction…Here is my post highlighting the whole affair..

    http://powellriverpersuader.blogspot.ca/2013/04/christy-clark-lies-on-cknw-radio-forced.html

  5. Furthermore…even if you won your complaint..The ad would merely be pulled, there will never be a humiliating public retraction..

    We need John Horgan to highlight the BC Liberal government lies..LNG..Site C…Education..Healthcare..Seniors care…Ethics..Children in care..ICBC..BC Hydro..MSP.

    It’s a long list….Your data…hang onto it..send it to John Horgan..

    Horgan needs to flash the data under Clark’s nore in a election debate..or even better yer, run a counter-ad disputing Clark’s claim with factual data..

    Cheers

Leave a Reply

Your email address will not be published. Required fields are marked *