The B.C. government’s projections for job creation and economic development from liquefied natural gas (LNG) have, at times, been so astronomical as to invite scorn.
There are 19 LNG projects proposed. The government has estimated that five LNG projects could generate 100,000 jobs over a nine-year period – an estimate the Canadian Centre for Policy Alternatives (CCPA) disputed in an analysis in July.
The CCPA put construction-period jobs at 2,000 to 3,000 over three years and only 200 to 300 permanent jobs. But companies that accurately gauge workforce markets might offer a more accurate snapshot of how many jobs one or two large LNG projects are likely to create.
Among the presenters at an LNG conference sponsored by AltaCorp Capital in Vancouver on August 25 were three companies that build and operate remote work camps in Canada, the U.S. and Australia.
Investors and industry players attending the conference heard that only three large LNG projects are likely to be built in B.C., with the two front-runners being Petronas’ $36 billion Pacific NorthWest LNG (PNW) project and Shell’s $40 billion LNG Canada project.
The smaller Douglas Channel LNG project proposed by AltaGas Ltd. (TSX:ALA) is also considered likely to get a final investment decision soon.
According to Trevor Haynes, CEO of Black Diamond Group, the Shell and Petronas projects combined would require between 19,000 and 25,500 beds (peaking in 2019) for LNG plant and pipeline construction.
That doesn’t include the beds that would be needed for upstream work in the gas fields of northeastern B.C., which is harder to estimate.
Black Diamond forecasts the number at 5,000 for each LNG project.
The Prince Rupert Gas Transmission line, which would supply PNW, would have nine camps running in three segments, located strategically with First Nations partners, Haynes said.
“A key element of the competitive nature for the camp companies is how they’re aligned in partnership with specific First Nations.”
The Coastal GasLink pipeline, which would supply the Shell LNG plant in Kitimat, would require 10 work camps, Haynes said.
While the work camps for the pipeline and upstream gas development would be mobile and temporary, the camps planned for Kitimat and Port Edward are more like instant towns, with multi-storey condo-type dwellings. Some of the housing and infrastructure could be more permanent. At least one of the proposals includes a hotel and affordable housing.
All three companies vying for contacts in B.C. have assembled land in Kitimat and Port Edward.
Black Diamond’s Pacific Lodge proposal for Port Edward, part of PNW, would be built on a 57-acre parcel a six-minute drive from the bridge to Lelu Island.
The plan includes a pub, a gymnasium, a medical centre and bus terminal that would shuttle up to 4,000 workers to and from the work site each day. Up to 1,000 units could become permanent.
At least one company has already landed a contract. Civeo, which operates in Canada, the U.S. and Australia, has a 15-month deal to develop 436 rooms, with a capacity to expand up to 2,000, in Kitimat at its Sitka Lodge for Shell’s LNG Canada project.
Horizon North Logistics has land in Kitimat that it wants to develop for temporary and permanent lodging.
Its land parcel in Kitimat has three zones. One is for a temporary work camp that would house up to 1,000 workers. Two other parcels are zoned for commercial and residential development. The residential parcel includes permanent affordable housing.
“Right now you’ve got a shortage of hotel rooms, you’ve got a shortage of apartments, and we believe that we can make some money working with groups like BC Housing on residential lands,” said Horizon North Logistics CEO Rod Graham.
Kitimat was designed for a larger population, so work camps housing several thousand workers are not expected to strain the town’s municipal services.
One thing that is strained, however, is its housing. A multibillion-dollar modernization project at the Rio Tinto Alcan aluminum smelter resulted in a boom that stressed the community’s housing inventory.
“Our vacancy rate dropped from 44% to zero, and that put pressure on housing,” said Kitimat economic development officer Rose Klukas. “So for the first time in Kitimat’s history, there was a need to look at social housing.”
Unlike Kitimat, Port Edward, with a population of less than 600, doesn’t have the infrastructure capacity to deal with an overnight explosion of up to 6,000 workers.
In an agreement with the town, PNW will provide $50 million to upgrade the town’s services, like sewer and water, and $100 million in long-term tax agreements.
The town is planning to use the LNG project and work camp development as a catalyst for residential development. It will need to add at least 300 new homes for PNW’s permanent workforce.
“We have three, maybe four, development companies knocking on our doorstep, with land acquisitions unfolding,” said Port Edward chief administrative officer Bob Payette.
Of the three companies that are bidding on contracts, Horizon North is the only one that is fully integrated – handling everything from the manufacturing to the transportation, installation and ongoing management of remote work camps.
It owns a manufacturing plant on Tk’emlúps te Secwepemc land in Kamloops, where its modular buildings are made. Until recently, it employed up to 300 people.
But 40% to 50% of the company’s business comes from Alberta, and oil’s plunge recently forced the company to lay off 48 people from its Kamloops plant.
All three companies bidding on LNG contracts in B.C. have been hit by the downturn in the Alberta oilsands. But the upside of that downturn is that it promises to free up workers with transferable skills to work in B.C. It also means that companies like Black Diamond can redeploy some of their mobile housing units from Alberta to B.C.
Haynes said the number of beds deployed in Alberta has dropped from about 70,000 to 50,000, leaving 20,000 units that can be redeployed.
“We may yet see that drop by another 10,000,” Haynes added.
“As you can imagine, we have seen a reduction in manpower in the greater oilsands area, and as projects in construction have come to conclusion, assets have been coming back into our yards and are available for redeployment. The economics are going to be better for the project developer than they were a couple of years ago.”
Haynes estimated Black Diamond’s total investment in developing the Pacific Lodge project would be $200 million to $250 million.
