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:
|$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|
|$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|
|FortisBC||$0.06||More than $60 million in committed local spending||June 2016|
|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|
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.
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.