Energy Companies Need to Prioritize Sustainability as Much as Profits

How would you describe the liquefied natural gas (LNG) opportunity for Canada?

I think it is the right opportunity at the right time. Global demand for natural gas is partly being driven by the effort to reduce carbon emissions by replacing existing sources of energy that are more carbon intensive. Canada has an opportunity to be part of that solution once our LNG project is up and running. Canada needs significant capital investment like this because a number of recent energy projects have been unsuccessful. Being able to get an energy project across the line, and then, being able to get it built, signals to the world that Canada is a safe place to invest.

“Global demand for natural gas is partly being driven by the effort to reduce carbon emissions by replacing existing sources of energy that are more carbon intensive.”

In terms of its scope, this is a large project consisting of both the construction of the LNG plant and the wharf, as well as the pipeline that will supply the gas. In addition, it will require associated upstream investments to reach a production level that is enough to fill the terminals, so we can export overseas. This project will see a a great deal of direct investment in British Columbia and will generate employment reaching up to 10,000 jobs during peak construction. Moreover, tax contributions will go to municipal, provincial and federal governments.

In terms of general acceptance of the proposal by key stakeholders, I cannot remember any other energy project that the federal government, the provincial government, municipal governments, all 20 First Nations on the pipeline route and First Nations at the plant site came out to support. This level of support, frankly, is unprecedented. From a competitiveness perspective, joint venture partnerships such as Shell, Petronas, China National Petroleum Corporation (CNPC), Mitsubishi and Korea Gas Corporation (KOGAS) came together for this project. This means that LNG Canada also makes a strong business case. We have found ways of reducing costs, increasing production efficiency, and ways of working with stakeholders who all wanted the project to proceed.

“Being able to get an energy project across the line, and then, being able to get it built, signals to the world that Canada is a safe place to invest.”

This project is also an example of a strong relationship between the energy sector and First Nations communities. The project has committed to direct contracts with First Nations businesses, committed to hire locally first, and invest in training. Coastal GasLink (CGL) has already announced more than $600 million worth of contracts to First Nations businesses along the length of the pipeline, and LNG Canada will also have significant First Nations contracting and investment.

Based on this experience, how should other projects engage with indigenous communities and at what stage?

Projects need to engage with First Nations from the very start. You need to start developing relationships, speaking to First Nations and bringing them into the room so they understand what you want to do. First Nations should also have a sense of ownership in the project. To get through the permitting process and ensure that First Nations communities want the facility, you have to work with them. When the final investment decision was made for the LNG Canada pipeline, everybody said “Congratulations!” – not to LNG Canada, but to communities, First Nations and governments.

“Projects need to engage with First Nations from the very start. You need to start developing relationships, speaking to First Nations and bringing them into the room so they understand what you want to do.”

You cannot expect to receive 100% support because there are some groups that will never accept that we continue to need to develop our energy resources. Our approach has always been to consult and hope that the opposition sees the broader benefit, both to local communities and to First Nations. A great expression that one of our First Nations colleagues shared with us was, “For too long we have accepted the way of those who would protect our trees, but what about our children? We need to build a future for them and that includes rebalancing industry and the environment.” Very often, there is a tricky balance between Indigenous economic development and environmental protection, and I believe we have been able to achieve the balance on this project.

What would be your advice to other players in the energy sector?

We are in an energy transition because we find ourselves on a warming planet due to greenhouse gases that are emitted from a number of sources. For those of us in the energy sector, we clearly have a role to play in producing lower carbon energy.

I would advise every organization to give as much importance to sustainability interests as they give to the CFO and CTO. Public expectations are not static nor are cumulative impacts on the environment. We need to adopt an approach of continuous review and adaptation. This isn’t easy, but energy projects will not be successful unless they listen, adapt and invest in the right types of technologies that meet people’s expectations.

“I would advise every organization to give as much importance to sustainability interests as they give to the CFO and CTO.”

For companies to have the bandwidth and the dollars to invest in new technologies and do more for the environment, they have to be profitable to begin with. Some of the challenges Canadian companies have faced are low oil and gas prices driven by limited market access. As a result, the ability to adopt new technologies or make business improvements is much more difficult given they require upfront capital investments. For LNG Canada, our joint venture partners had the wherewithal to invest upfront even if it meant it would be more expensive – a good case in point is our choice to combine LMS100 GE gas turbines with BC Hydro renewable power. This decision was more expensive, but it enabled us to have one of the lowest carbon intensities of any large LNG facility in the world.

How can Canada’s energy sector become more competitive and environmentally sustainable?

If we want to be able to export our products and be a major player in the resource sector across the world, we have to constantly question our competitiveness. In addition, partnership between industry and government is crucial. The government is willing to help, but industry has to step up and want to innovate. For the LNG Canada project, we worked with the federal and provincial governments, which became willing partners.

“For companies to have the bandwidth and the dollars to invest in new technologies and do more for the environment, they have to be profitable to begin with.”

In terms of taxation, the government needs to introduce the right incentives for competitiveness and innovation. For example, in BC, we worked with the government to establish an even playing field with other industry. BC’s Provincial Sales Tax is a great example of a deterrent for large capital investments in the province. So now, we have an operating program with the BC government, which allows us to be more competitive.

“The best opportunity to lower emissions is through organizations like ours that can provide revenue through carbon taxes.”

The government should continue to recognize the role that natural resources can play in a lower carbon economy. Canada should be finding every opportunity it can to open new export markets so we can continue to be profitable and invest in sustainable innovation. We need to use fossil fuels for the time being and the carbon tax revenues that they generate could be used to help in the energy transition. The best opportunity to lower emissions is through organizations like ours that can provide revenue through carbon taxes.

How do you envision Canada’s future economy?

I have two children and believe that we have to do what we can to decarbonize the economy and the world. But I also recognize that even if we do everything right in Canada, it will not make a difference if larger countries that emit the majority of greenhouse gas emissions are not doing their part. So, we have to work hard to ensure that countries that produce the most carbon emissions are working together with us to reduce emissions. The IPCC report indicates regionalization of carbon emissions regimes will fail to deliver the necessary carbon reductions to keep under a 1.5 degree world. LNG is so important, especially in British Columbia, because we can actually provide some of the lowest carbon intensity LNG in the world that can displace more emissions-intensive energy.

“We have to work hard to ensure that countries that produce the most carbon emissions are working together with us to reduce emissions.”

I certainly do not believe that the right future will be created if we stop all development of fossil fuels today; there needs to be a transition. The economic dislocation as a result of drastic measures will cut into the revenues that provide for services to my kids. 30 to 40 to 50 years from now, the world will look extremely different. We will begin to see an economy that produces fewer greenhouse gases than we have ever imagined.