British Columbia LNG Workforce Occupation Forecast

Transcription

1 British Columbia LNG Workforce Occupation Forecast Prepared for the British Columbia Ministry of Jobs, Tourism and Skills Training May 21, 2014

2 Contents 1 Executive Summary 1 2 Project Overview Project Background Scope of Work Understanding this Document 5 3 Introduction Overview B.C. Context 6 4 Industry Definitions Definitions 8 5 Research Methodology 10 6 Scenarios Assumptions 14 7 Demand Projections Demand Overview Aggregated Demand Estimated Demand by Phase and Value Chain Demand by Occupation (Direct Workforce) 18 8 Conclusion 22 Appendix 1 References 23 Appendix 2 Demand Input Ranges 24 Appendix 3 Estimated Direct Workforce Demand by Occupation (2018) 27 Appendix 4 Estimated Direct Workforce Demand Over Time Medium Scenario 29 Appendix 5 Estimated Direct Workforce Demand Over Time High Scenario 31 Appendix 6 NOC Occupations Supporting LNG Industry 32 Appendix 7 Estimated Direct Workforce Demand by Occupation High Scenario 33 Appendix 8 Estimated Direct Workforce Demand by Occupation Medium Scenario 35 Final Version

3 Disclaimer This document has been prepared by KPMG LLP ( KPMG ) for the Ministry of Jobs, Tourism and Skills Training ( Client ) pursuant to the terms of our engagement agreement with Client dated January 22, 2014 (the Engagement Agreement ) Ministry Contract No.: C14PSR002. KPMG neither warrants nor represents that the information contained in this document is accurate, complete, sufficient or appropriate for use by any person or entity other than Client or for any purpose other than set out in the Engagement Agreement. This document may not be relied upon by any person or entity other than Client, and KPMG hereby expressly disclaims any and all responsibility or liability to any person or entity other than Client in connection with their use of this document. Final Version 1

4 1 Executive Summary Introduction and Context If the Liquefied Natural Gas (LNG) sector in B.C. proceeds as expected, it will require a large and highly skilled workforce to develop the facilities, pipelines and gas production needed to export B.C. LNG to overseas customers. This workforce constitutes one of the most important project considerations for LNG proponents (Proponents) and one of the biggest opportunities for the Province. Our study begins to lay the groundwork for solutions to this challenge by outlining the occupational breakdown of the workforce across each of the stages of the value chain under two different scenarios of how the LNG industry could unfold. Methodology The forecast developed for this study is based on inputs from Proponents which are organized into possible future scenarios and then forecast using a proprietary model developed by Applications Management Consulting 1. Demand inputs on direct employment, capital spending, and project timelines for the facility, pipeline and extraction activities of the LNG industry were used to develop the demand forecasts. These inputs were sourced from Proponent surveys, Proponent websites, and other publically available data. Two forecast scenarios were developed to reflect a high and medium investment in the LNG industry. These scenarios reflect actual demand inputs, assumptions, and assumptions on development sequence of projects. Ultimately, the estimates included in this report are based on specific assumptions; actual results will be based on future events. Estimated and actual results will vary. This variance may be material. Table 1: Characteristics of Two Scenarios Scenario* Description Number of Trains Capacity (MTPA) Pipeline (km) Wells (per yr) High Investment 2 projects with 4 trains + 3 projects with 2 trains ,000** 1,500-1,700 (ramp up) (steady state) Medium Investment 3 projects with 2 trains , (ramp up) (steady state) * Assumes 80% of capital is used on shore **Assumes some shared pipeline usage 1 Forecasts in this report are all estimates subject to error. The model used depicts possible future actions of third party organizations based on future events which are subject to change. Final Version 1

5 Employment Demand Based on the specific model assumptions, the peak employment demand is estimated to occur in 2018 and, for the high scenario, also in In 2018, it is estimated that 26,200 to 32,100 Full Time Equivalent (FTE) jobs could be required to construct and begin to operate B.C. s LNG industry. For the high investment scenario, this level of employment is sustained for close to a decade as projects extend into phase 2 expansions. This is an unprecedented level of labour and skills demand which is in line with what Australia s LNG sector has seen during the development of their LNG sector. Figure 1: Estimated Direct Total Operations and Construction Employment Thousands of FTEs 35 Medium Scenario 35 High Scenario Construction Construction Operations Operations There are three value chain segments that could require large workforces: the liquefaction facility in the Northwest, extraction in the Northeast, and a pipeline that links them together. KPMG analysis shows that while the facility would require the most workers during construction, upstream drilling and extraction activity in the Northeast would provide the majority of long-term jobs. Figure 2: Estimated Aggregate Construction Employment per Major Activity Hub Thousands of FTEs Medium Scenario High Scenario Facility Pipeline Upstream Activity Facility Pipeline Upstream Activity Final Version 2

6 Figure 3: Estimated Incremental Aggregate Operations Employment per Major Activity Hub Thousands of FTEs Medium Scenario Pipeline Upstream Activity High Scenario Pipeline Upstream Activity Occupations in Demand Construction of LNG facilities, pipelines, and upstream processing and drilling activities requires a number of occupational groups at varying levels of skills. The largest demand is generally for general construction labour and helpers which could provide a large amount of employment for the Province. Technical trades such as welders and steamfitters could also be critical, and would require collaboration between Government and Proponents to ensure that training, licensing and certification will be available to support demand. Significant numbers of management and purchasing talent are also anticipated to support the high number of contracts administered in these large projects. In fewer numbers but critical to the development of the projects could be a relatively low number of experts, such as civil, mechanical, and petroleum engineers with highly specialized skill sets. Figure 4: Estimated Top Occupations in Direct Workforce Demand in 2018 FTEs 12,000 11,000 10,000 9,460 11,820 +2,360 Medium Scenario High Scenario 9,000 8,000 7,000 6,000 5, ,000 3,000 2,000 1,000 3,810 3, ,200 1,800 1,480 1,220 1,200 1,460 1,160 1,410 1, , Construction trades helpers and labourers Steamfitters, pipefitters and sprinkler system installers Welders and related machine operators Concrete finishers Transport truck drivers Carpenters Heavy equipment operators (except crane) Gas fitters Purchasing agents and officers Crane operators Final Version 3

7 Conclusion The potential LNG industry in B.C. offers a large opportunity for job demand within the Province. This study outlines the need for a large number of different occupations for the development of liquefaction facilities, pipelines, processing and drilling. Underlying this demand is the need for industry and Government to work together to ensure adequate supply are available to avoid shortages and to bring this industry to fruition. Final Version 4

8 2 Project Overview 2.1 Project Background The Ministry of Jobs, Tourism and Skills Training (the Ministry) wishes to understand the detailed occupation projections for the Province s Liquefied Natural Gas (LNG) industry. To accomplish this, the Ministry has contracted KPMG LLP (KPMG) to support the development of a study to investigate the current labour market related to the LNG industry; develop a labour market forecast model to project occupations for the industry; and produce occupation projections by 4-digit National Occupation Classification (NOC) 2011 version. 2.2 Scope of Work KPMG s scope of work as it pertains to this analysis is as follows: Review research and estimates generated by the Ministry and to perform a Gap Analysis of collected data versus required inputs to the forecast model. Make recommendations for updating data and finalize input table. Develop options for possible future scenarios and agree with Ministry on approved scenarios. Estimate occupation projections on a 10-year period based on approved scenarios. Review with Ministry and Industry and update projections as required. Produce a final report outlining projections and findings. 2.3 Understanding this Document Our procedures consisted of inquiry, observation, comparison and analysis of provided information. Such work does not constitute an audit. Accordingly, we express no opinion on outcomes and future events. Accordingly, the following limitations apply to this document: The estimates developed in this project are based on a given set of assumptions and based on third party forward looking information collected by the Ministry and KPMG. Actual employment will be based on future events and will vary from the estimates. This variance may be material. These estimates were developed in isolation to changes within other industries and do not reflect the impact to the entire provincial employment environment. The estimates are not forecasts and we do not assign any probability to the likelihood that these estimates will materialize. Final Version 5

9 3 Introduction 3.1 Overview The LNG sector in B.C. could need a large and highly skilled workforce to develop the facilities, pipelines and production activities required to export B.C. LNG to overseas customers. This workforce constitutes one of the most important project considerations for LNG Proponents and one of the biggest opportunities for the Province. This study begins to lay the groundwork for solutions to this challenge by outlining the occupational breakdown of the workforce across each of the stages of the value chain in two different scenarios of how the industry could unfold. 3.2 B.C. Context British Columbia is attracting investors from around the world to consider the extraction, processing and export of liquefied natural gas. At time of printing, the National Energy Board (NEB) has published that it has accepted applications from the export arms of the consortiums representing 11 different LNG projects within the industry. Table 2: NEB Export Applications for LNG in B.C. LNG Project Company Location Kitimat LNG Pacific Northwest LNG LNG Canada Prince Rupert/Spectra LNG Woodfibre LNG KM LNG Operating General Partnership Pacific NorthWest LNG Ltd. LNG Canada Development Inc. Prince Rupert LNG Exports Limited Woodfibre LNG Export Pte. Ltd. Application Status Term Length Licence Issued Kitimat Approved 20 years Yes Port of Prince Rupert Approved 25 years Yes Kitimat Approved 25 years Yes Port ofprince Rupert Approved 25 years Yes Squamish Approved 25 years Yes WCC LNG WCC LNG Ltd. Campbell River Approved 25 years Yes Douglas Channel Energy Partnership Triton LNG Aurora LNG BC LNG Export Cooperative LLC Triton LNG Limited Partnership Aurora Liquefied Natural Gas Ltd. Kitimat Approved 20 years Yes TBD Under Review 25 years N/A Prince Rupert Under Review 25 years N/A Kitsault Energy Kitsault Energy Ltd. Kitsault Under Review 25 years N/A Stewart Energy Canada Stewart Energy Group Ltd. Stewart Under Review 25 years N/A While the end state of the LNG industry within B.C. has yet to be determined, the opportunity for B.C. s workforce is becoming clearer. Each facility, pipeline and drilling program could require thousands of Full Time Equivalent (FTE) person hours and billions of dollars to develop. These projects require highly skilled, skilled and low skilled workers from local jurisdictions and B.C. overall. Demand for workers could be high and could provide many opportunities for wealth creation. In order to achieve this opportunity, workforce challenges would need to be addressed by the Province and by each Proponent as they work towards a Final Investment Decision (FID). Workforce challenges are one of the primary contributors to project cost escalation seen in the development of LNG industry in Australia. Contributing to these Final Version 6

10 risks are the remote nature of the work, the highly technical skill set required in key occupations, and the wide range of stakeholders and partners required to deliver the project. There is no reason to believe that B.C. would not have this blend of technical, logistical and social challenges within its industry development. Identifying win-win solutions between Proponents, stakeholders and Government will be key. Final Version 7

11 4 Industry Definitions 4.1 Definitions The scope of LNG activities included in this study is defined as the activities occurring from the extraction of natural gas to the point where LNG-loaded ships depart the ports in B.C. Activities within this scope were divided into three major hubs: natural gas extraction & processing (upstream activity), transmission (pipeline), and liquefaction & transportation (see Figure 5). Activities in each major hub were further broken down into construction and operation phases. Direct and indirect workforce requirements were then estimated for each of these groups. 2 Figure 5: LNG Major Hubs of Activity Natural Gas Extraction Transmission & Processing Liquefaction & Transportation Natural Gas Extraction & Processing (Upstream Activity) Extraction and processing is the initial step in the LNG chain. After successful exploration, wells are drilled to extract natural gas. The raw gas is then transmitted by pipelines into processing plants where gas is separated from liquids and impurities to produce pipeline-quality natural gas. Examples of some of these activities, which typically occur in Northeast B.C., are Apache s upstream activities for the Kitimat LNG project, Shell s Groundbirch project, and Progress Energy s activities in Montney. Construction activities within extraction and processing are significant and include exploration, site preparation, and drilling. Geological surveys and seismic exploration help locate the gas and position the site. Then a number of activities (such as legal, land permitting agreements, etc.) occur to prepare the site. Finally drilling and development of supporting infrastructure occurs to supply the required gas for processing and then on to transmission. Operations activities within extraction and processing include daily monitoring and operations of drilling as well as the operation of processing plants. Large numbers of workers could also be required for the ongoing drilling of horizontal wells which are required to maintain capacity at the downstream plants, as older wells deplete local reserves. This activity is the largest driver of long-term jobs in the Northeast, as described below. Transmission (Pipeline Activity) The next step in the LNG chain is transmission of natural gas to liquefaction sites via a network of pipelines across the Province linking the gas wells in the Northeast to liquefaction facilities on the west coast. Some example pipeline projects in the Province are Pacific Trail Pipeline, Coastal GasLink Pipeline, and Westcoast Connector Gas Transmission. 2 Indirect activity results from production changes in industries that supply the direct activity where the change was initiated. Final Version 8

12 The scope of the construction of these B.C. pipelines is impressive given the mountainous remote location of the pipelines and could require large numbers of workers, specialists and management. Construction activities within transmission include planning/surveying, preparing the pipeline route, building the pipeline system, and postconstruction testing and adjustments. Construction of pipelines starts with surveying, consultation, staking the route, and clearing and trenching the construction path. The pipe pieces are then positioned in the trench, bent and joined, and all valves and fittings are installed. Finally the trench is backfilled, and pipeline testing activities occur to ensure the system meets all requirements and expectations. Operations activities are somewhat limited for pipelines and mainly include regular inspection and safety activities, closely monitoring compression to ensure consistent and regular flow of gas, and coordination with end facility for storage. Liquefaction & Transportation The final step in the LNG chain before shipment is liquefaction. The liquefaction process involves removal of certain impurities such as acid gases, water, and heavy hydrocarbons that could cause difficulty handling LNG downstream. The natural gas is then condensed into a liquid at close to atmospheric pressure by cooling it to approximately C. The liquefied natural gas (LNG) is then stored in large tanks and safely loaded onto ships for transport overseas. Most liquefaction plants in B.C. are likely going to be in Prince Rupert (Aurora LNG, Imperial Oil/ExxonMobil Canada, Woodside LNG), Port of Prince Rupert (Pacific NorthWest LNG and Prince Rupert LNG), and Kitimat (Douglas Channel Energy, Kitimat LNG, LNG Canada, and Triton LNG). Construction activities for LNG plants constitute the largest areas of worker demand. Construction typically starts with planning, which includes all types of structural and/or civil site assessments and preparation, regulatory and permitting filings. Procurement agreements are then finalized, labour requirements for construction of the facility (including the port) are dealt with, and then the construction of the facility starts. Equipment testing and commissioning are the last steps before operation starts. Operations activities for LNG plants represent a small portion of worker demand and mainly include technical positions in the plant, staff at the shipping port, supporting administration and maintenance staff, and management positions. Final Version 9

13 5 Research Methodology The following methodology was used to create a realistic outlook for occupational demand associated with direct and indirect employment in the LNG industry for two scenarios. The study developed the aggregate demand of the LNG industry for workers by accessing publically available estimates of project requirements and working with industry to collect feedback, and refine inputs and assumptions where required. First step in labour demand forecasting was establishing a workforce requirement and occupation profile from the existing projects and previous analyses of the LNG industry. Workforce requirement estimates were gathered for facilities, pipelines and extraction activities from Proponents. In cases where information did not exist, standards and averages were used to fill gaps. For example, when capital cost of a pipeline project was missing, capital costs of other projects were used to estimate an average cost per Inch Mile of pipeline. This normalized cost was then used to estimate the construction cost of the contemplated project. To ensure estimates were in line with reality and to maintain confidentiality, the ranges of standards and inputs were reviewed and validated with Proponents (please see Appendix 2 for input range estimates). Second the workforce information from Proponents was then combined with base labour demand, growth projections, and inter-industry trade flows to estimate direct LNG industry employment. The indirect and induced economic impact of the LNG industry activity was estimated from Statistics Canada s input-output model at a 4-digit NOC 2011 (National Occupational Classification) level of occupations for the B.C. economy. Finally the estimates were aggregated and released in scenarios based on total LNG production capacity and size of facilities / pipelines. These scenarios provide the opportunity to view alternative development projections. In total 5 projects and 2 extensions across three value chains (21 projects in total) have been estimated and utilized for the scenarios. Final Version 10

14 Figure 6: Demand Methodology Collect Workforce Estimates Forecast Demand and Occupational Breakdown Aggregate and Release in Scenarios Collect existing project data from proponents and research for facilities, pipelines, extraction* Update data, fill gaps, and refine assumptions based on industry standards and averages, e.g.: Capital per MTPA, Capital per Inch Mile, Workforce per Capital Workforce per TCF extraction Review with proponents Build direct workforce requirements from proponent information and constructed data Estimate direct demand for LNG industry workers using North American Industry Classification System (NAICS) and proponent and third party data Estimate indirect and induced economic impacts of direct LNG industry activity using provincial input-output model broken into occupations at a 4-digit NOC Aggregate direct workforce numbers and indirect demand Average demand by capacity and pipeline length/diameter Release demand forecast and occupational breakdown in two scenarios based on capacity and pipeline length/diameter Definitions The following definitions support discussion on the employment impacts of the LNG industry: TCF Trillion Cubic Feet (TCF) is a volume measurement of natural gas. TCF per year is widely used in the oil and gas industry as a standard measure for describing production and pipeline capacity. MTPA Million Tonnes Per Annum (MTPA) of liquefied natural gas is the standard measure used for defining production of LNG facilities. Inch Mile Pipeline diameter in inches times pipeline length in miles, which is a widely used measure for describing the scale of a pipeline project. Full Time Equivalent (FTE) The number of full time equivalent jobs, which may be a combination of full-time, part-time and seasonal jobs. Direct Employment Employment opportunities that are directly generated by construction and annual operations of the facilities, pipelines, and upstream activities. Indirect Employment Employment opportunities related to the purchase of goods and services required to support the direct economic activity in the LNG industry. Some examples of indirect occupations generated by the LNG industry are employment opportunities created in accounting, legal, hospitality, and transportation services. Final Version 11

15 Induced Employment When incomes from direct and indirect employment are spent and respent on a variety of items in the broader economy and household spending increases, it gives rise to further job growth which are considered induced employment effects. National Occupational Classification (NOC) - The National Occupational Classification (NOC) is the nationally accepted reference on occupations in Canada. It organizes over 40,000 job titles into 500 occupational group descriptions. The NOC provides a standardized framework for organizing the world of work in a coherent system. It is used to manage the collection and reporting of occupational statistics and to provide understandable labour market information. The model in this study provides occupational forecasts at 4-digit NOC 2011 levels. Modularization Modularization is a construction strategy that is used to enable large amounts of fabrication work to be carried out in a different location than the facility. This strategy has recently been applied to an onshore LNG plant during the construction of North West Shelf Venture Phase V LNG Expansion in Western Australia, which was completed in 2008 (1). This strategy is becoming more prevalent in recent years, and many LNG Proponents consider applying it because it allows fabrication work to be carried out in a safer environment and at a lower cost. Onshore versus Offshore Spending The model considers how much project costs and operating costs could be directed into Canada versus internationally. This assumption impacts the level of indirect and induced job creation since these categories of employment are based on in country spending levels. Final Version 12

16 6 Scenarios There are currently 11 LNG export projects located in B.C. that have submitted export applications to the NEB and are in various stages of their permitting process (2). However, none of the Proponents have made their final investment decision. Given this dynamic environment which surrounds the development of the LNG export industry in B.C., this report outlines a range of labour demand based on two plausible scenarios. These scenarios are based on inputs received from Proponents, knowledge of the industry, the NEB applications and consultation with the Ministry. Characteristics of these two scenarios are shown in Table 3. In the high investment scenario, it is assumed that the industry in B.C. will grow to a size similar to the LNG industry in Australia. It is assumed that a total of 5 LNG facilities will be built in the Province. Three of these facilities will have 2 trains each, while the other two projects will have 4 trains developed in separate phases of construction. Once all projects are in operation, the industry could have the capacity to export 82 Million Tons Per Annum (MTPA) of LNG or 10.7 billions of cubic feet of gas per day. In order to supply these facilities, 1,500-1,700 wells could be required to be drilled per year during the ramp up of the industry, and a steady state drilling of around wells per year is required. Furthermore, 3,000km of pipeline would be required to transfer the gas from Northeast to Northwest where LNG facilities are located. This assumption assumes some sharing of pipeline capacity between projects. The medium investment scenario is a more conservative outlook. In this scenario, it is assumed that over the next ten years 3 LNG export facilities will be built in B.C. Each facility would have 2 trains, and the combined LNG export capacity of the projects would be 34 MTPA or 4.4 billions of cubic feet of gas per day. It is also assumed that these projects would require 1,850km of pipeline construction, drilling of approximately wells per year during the ramp up period, and drilling of around wells per year during the operations life of LNG plants. Table 3: Characteristics of Two Scenarios Scenario* Description Number of Trains Capacity (MTPA) Pipeline (km) Wells (per yr) High Investment 2 projects with 4 trains + 3 projects with 2 trains ,000** 1,500-1,700 (ramp up) (steady state) Medium Investment 3 projects with 2 trains , (ramp up) (steady state) * Assumes 80% of capital is used on shore **Assumes some shared pipeline usage These scenarios contemplate significant capital spend. Over the short-term the majority of spend would be derived from the construction of LNG facilities, which requires upwards of $8-12B per facility. Pipelines on a relative basis are the least capital intensive piece of the value chain at approximately $2-6B per project. After downstream construction Final Version 13

17 is complete, drilling would account for the majority of spend over the lifetime of the project with capital budgets often over $10-14 Billion. The high scenario results in a total capital investment of $175B in the Province. This includes investments in 7 major LNG projects (5 projects and 2 phase II expansions) across the 3 segments of the LNG value chain (upstream, pipeline, and facility) for a total of 21 projects. The largest portion of investment is due to continued upstream activity, which is estimated to be approximately $80-90B. Facilities represent the next largest capital intensive segment at around $60-$70B. Pipeline construction is the least costly portion of the LNG value chain at approximately $25-35B. The medium scenario would result in a total capital investment of $78B in B.C. from 9 projects (3 projects across the 3 value chain steps of each LNG development). 6.1 Assumptions The following assumptions form an integral part of KPMG s analysis and employment projections. Scenarios The two scenarios are based on the inputs received from Proponents and our current understanding of the industry, but the construction start years were staggered to present a situation where different projects start at different years. Modularization Analysis in this study does not directly take modularization into account; that is the degree to which plants are build in modular components in other locations and modules assembled on site. However, loss of jobs to overseas has been considered based on the level of investment being spent in B.C versus abroad. In the two scenarios analyzed in this report, it was assumed that 80% of investments reported by the Proponents are going to be spent in B.C. while 20% would be spent offshore. This assumption has a direct impact on indirect and induced job creation as fewer funds would be available for local contractors to hire new workers. Capital Spend to Indirect & Induced Job Creation Proportions Indirect and induced job creation is directly proportional to the overall LNG investment in the Province. Therefore if local spending is reduced (either by directing more spend abroad or from an absolute reduction in spend), indirect and induced job creation would reduce on a proportional basis. Spending has been estimated for each of the projects on a capital costs for the project (spread across the life of the project) and operating costs incurred on an annual basis thereafter. Yearly Construction FTEs Most Proponents reported estimated construction FTEs for the peak year. The analysis assumed a ramp-up and ramp-down period resulting in a typical project employment curve. Upstream FTEs The upstream FTEs are incremental to existing employment in the industry based on new investments and therefore do not reflect the total employment of the industry. For the sake of the study, upstream FTEs are considered to enter operations after year 4 of the project. However, it should be noted that many of these workers would be in drilling which is typically a capital expense. Final Version 14

18 7 Demand Projections 7.1 Demand Overview The demand forecasts in this study are developed in a way that allows in-depth analysis in 3 dimensions. First, we can look at direct versus indirect occupations created in the Province as a result of the LNG industry. Second, the model allows a view workforce requirements based on the phase of the project (i.e. construction versus operation). Finally for each phase of the project, the model provides a breakdown of demand by major hubs of activity (upstream, pipeline, facility). 7.2 Aggregated Demand The construction phase of each project typically takes around 4 years to complete with project workforces following a ramp up and ramp down of activity. As shown in the right diagram in Figure 7, total direct workforce demand for the high scenario is extensive and has a bimodal shape with two peak years. The second peak in 2022 indicates a higher demand (33,900 FTEs) compared to the first peak in 2018 (32,100 FTEs) because of the overlap of new construction workers required for phase 2 extensions with the existing demand for operation workers in the 3 active value chains. In the medium scenario, total direct workforce demand peaks at 26,200 FTEs in 2018 followed by a ramp down as projects get close to operation. Once all three projects are operational, there is a steady state demand of 3,500 direct FTEs that would continue as long as the LNG export facilities are operating (see the left diagram in Figure 7). Figure 7: Estimated Direct Total Operations and Construction Employment Thousands of FTEs 35 Medium Scenario 35 High Scenario Construction Construction Operations Operations Estimated Demand by Phase and Value Chain This section provides aggregated demand by type of activity and value chain. Final Version 15

19 7.3.1 Direct Workforce Demand: Construction Figure 8 shows the breakdown of direct workforce requirements during the construction phase of the project. This analysis shows the peak year for construction requiring 31,700 FTEs in the high scenario and 25,700 FTEs in the medium scenario. In both cases almost half of the occupations created are related to construction of the LNG facilities alone with the pipeline and upstream activities creating the remaining construction jobs. It can also be seen that demand for upstream activities peaks earlier than pipeline and facility activities. This is because drilling activities start earlier than facility and pipeline construction as oil and gas companies work to prove up the resource to ensure long-term supply. In fact, many Proponents have already started drilling activities in the Northeast. The most striking difference between each scenario is the clear peak in the medium scenario versus the sustained requirements in the high scenario. In fact, the 10-year forecast period used in this study does not capture end of construction for the high scenario because construction activities for the Phase II projects are expected to continue until Figure 8: Estimated Aggregate Construction Employment per Major Activity Hub Thousands of FTEs Medium Scenario High Scenario Facility Pipeline Upstream Activity Facility Pipeline Upstream Activity Direct Workforce Demand: Operations The majority of operations workforce demand is from upstream drilling activities in the Northeast. In 2023 upstream activities result in a demand of 4,200 FTEs in the high scenario and 2,800 FTEs in the medium scenario (see Figure 9). Overall, in the high scenario the LNG industry is expected to create around 5,300 steady state FTEs by It is worth noting that the demand estimate shown in 2023 for the high scenario does not reflect the overall steady state demand for operations of the LNG industry since the industry is still growing within this timeframe in the high scenario. The steady state demand for direct FTEs in the high scenario is estimated to be approximately 8,000-9,000 FTEs by In the medium scenario the LNG industry is expected to create around 3,500 steady state FTEs by Final Version 16

20 Figure 9: Estimated Incremental Aggregate Operations Employment per Major Activity Hub Thousands of FTEs Medium Scenario Pipeline Upstream Activity High Scenario Pipeline Upstream Activity Indirect Workforce The LNG industry could create substantial indirect employment based on its capital spend in project development and its ongoing operations expenses surrounding maintenance and other activities. This spending would drive the creation of jobs in a variety of industries which support oil and gas activities, including infrastructure development, construction, accounting and legal services, accommodations, and a variety of other areas. Based on the enormous spend of the industry, indirect employment could approximately double the growth of jobs overall. Indirect occupations created due to the LNG industry are expected to peak at 27,000 FTEs in 2018 and 33,000 FTEs in 2022 for the high scenario. As a result, total workforce requirements for the high scenario are 59,100 FTEs in 2018 and 66,900 FTEs in For the medium scenario, indirect occupations are expected to peak at 22,200 FTEs in 2018, which results in a total demand of 48,400 FTEs in Figure 10: Estimated Direct and Indirect Workforce Requirements Thousands of FTEs Medium Scenario High Scenario Direct Direct Indirect Indirect Final Version 17

21 7.3.4 Induced Workforce The LNG industry could create induced employment as a result of increased household spending from direct and indirect employment effects. Similar to indirect employment, the induced workforce also depends on the LNG industry s capital spend in project development and its ongoing operations expenses surrounding maintenance and other activities. This influx of spending is estimated to create induced job growth peaking at 11,930 FTEs in 2018 and 12,970 FTEs in 2022 for the high scenario. Table 4: Estimated Induced Workforce Requirements (FTEs) High Scenario Induced Workforce Requirements - 1,240 4,280 8,460 11,930 10,510 9,710 12,260 12,970 9, Demand by Occupation (Direct Workforce) As seen in the previous section, the LNG industry could create a large workforce demand during the construction phase (4-5 year duration for each project) followed by steady state demand of certain occupations during the operations phase of the projects. These workforce requirements were forecasted at the occupational categories defined by the NOC 2011, which include over 40,000 job titles categorized into 500 occupational group descriptions. The model forecasts that 60 NOC occupational categories could be directly supporting the LNG industry (See Appendix 6 for the complete list of occupations). Based on our forecast, construction trades helpers and labourers were projected to be the largest occupation in demand. Depending on the scenario, a demand of approximately 9,500-11,800 FTEs are expected to be observed by As shown in the following figures, the next top occupation in demand is the NOC category that includes steamfitters, pipefitters, and sprinkler system installers with around 3,100-3,800 FTEs during the peak year. Welders and related machine operators, concrete finishers, and truck drivers are also expected to be among high-demand occupations. Final Version 18

22 Figure 11: Top Occupations by Direct Workforce Demand Medium Investment 2018; FTE as % of total demand; Estimated Figure 12: Top Occupations by Direct Workforce Demand High Investment 2018; FTE as % of total demand; Estimated 12% 12% 7% 7% 36% 5% 37% 5% 5% 5% 4% 4% 4% 4% 19% 3% 3% 3% 19% 3% 3% 3% Construction trades helpers and labourers Steamfitters, pipefitters and sprinkler system installers Welders and related machine operators Concrete finishers Transport truck drivers Carpenters Heavy equipment operators (except crane) Gas fitters Purchasing agents and officers Crane operators Others Construction trades helpers and labourers Steamfitters, pipefitters and sprinkler system installers Welders and related machine operators Concrete finishers Transport truck drivers Carpenters Heavy equipment operators (except crane) Gas fitters Purchasing agents and officers Crane operators Others Construction trades helpers and labourers typically assist skilled tradespersons and perform labouring activities at construction sites, natural gas plants and other areas such as quarries and in surface mines. They are employed by construction companies, trade and labourer contractors, pipeline contractors, and the oil and gas industry. Most employees in this group require some experience as a general construction labourer but do not require significant training. Some pipeline workers, such as stabbers, mandrel operators and pre-heater tenders, usually require one season of experience in oil and gas pipeline construction (3). Mobility is very common among workers in this group, and they are in high demand both in other industries as well as in other provinces. Steamfitters, pipefitters and sprinkler system installers are the second high-demand occupational group with workforce requirements of approximately 3,100-3,800 FTEs. Steamfitters and pipefitters typically layout, assemble, fabricate, maintain, troubleshoot and repair piping systems carrying water, steam, chemicals and fuel in heating, cooling, lubricating and other process piping systems. Sprinkler system installers fabricate, install, test, maintain and repair water, foam, carbon dioxide and dry chemical sprinkler systems in buildings for fire protection purposes. These workers are typically employed in maintenance departments of factories, plants and similar establishments, and pipefitting and sprinkler system contractors, or they may be self-employed. Many positions in this category require completion of 4-5 year apprenticeship programs or college or industry courses in order to be eligible for trade certification. Final Version 19

23 Figure 13: Estimated Top Occupations in Direct Workforce Demand in 2018 FTEs 12,000 11,000 10,000 9,460 11,820 +2,360 Medium Scenario High Scenario 9,000 8,000 7,000 6,000 5, ,000 3,000 2,000 1,000 3,810 3, ,200 1,800 1,480 1,220 1,200 1,460 1,160 1,410 1, , Construction trades helpers and labourers Steamfitters, pipefitters and sprinkler system installers Welders and related machine operators Concrete finishers Transport truck drivers Carpenters Heavy equipment operators (except crane) Gas fitters Purchasing agents and officers Crane operators Final Version 20

24 Table 5: Description of Top Occupations in Demand as per 2011 National Occupational Classification (NOC 2011) Occupation 4-digit NOC Description as per 2011 NOC Construction trades helpers and labourers 7611 Assist skilled tradespersons and perform labouring activities at construction sites, plants, quarries and in surface mines. They are employed by construction companies, trade and labour contractors, and surface mine and quarry operators. Steamfitters, pipefitters and sprinkler system installers 7252 Layout, assemble, fabricate, maintain, troubleshoot and repair piping systems carrying water, steam, chemicals and fuel in heating, cooling, lubricating and other process piping systems. Welders and related machine operators 7237 Operate welding equipment to weld ferrous and non-ferrous metals. This unit group also includes machine operators who operate previously set up production welding, brazing and soldering equipment. Concrete finishers 7282 Smooth and finish freshly poured concrete, apply curing or surface treatments and install, maintain and restore various masonry structures such as foundations, floors, ceilings, sidewalks, roads, patios and high-rise buildings. Transport truck drivers 7511 Operate heavy trucks to transport goods and materials over urban, interurban, provincial and international routes. Carpenters 7271 Construct, erect, install, maintain and repair structures and components of structures made of wood, wood substitutes, lightweight steel and other materials. Heavy equipment operators (except crane) 7521 Operate heavy equipment used in the construction and maintenance of roads, bridges, airports, gas and oil pipelines, tunnels, buildings and other structures; in surface mining and quarrying activities; and in material handling work. Gas fitters 7253 Install, inspect, repair and maintain gas lines and gas equipment such as meters, regulators and heating units in residential, commercial and industrial establishments. Purchasing agents and officers 1225 Purchase general and specialized equipment, materials, land or access rights and business services for use or for further processing by their establishment. Crane operators 7371 Operate cranes or draglines to lift, move, position or place machinery, equipment and other large objects at construction or industrial sites, ports, railway yards, surface mines and other similar locations. Final Version 21

25 8 Conclusion KPMG would like to acknowledge the support of the Ministry and industry in the development of this report. As a critical issue, we see tremendous value in researching and addressing the LNG workforce challenge. Looking forward we recommend the following next steps: 1. Continued Support for the Development of an LNG Workforce Investment in LNG projects in B.C. has the opportunity to make a considerable impact on the job landscape of the Province but also represents a potential challenge for policymakers and Proponents. Key demand occupations could likely face shortages without a concerted effort to increase supply, training, and mobility of workers. Ongoing work to identify solutions is required by Government and Industry to address these potential challenges. 2. Additional Study of the Supply to Meet Demand As a critical element of Proponent s requirement for Final Investment Decision and as an important aspect the Province s job creation plan, more research is required to determine the potential Supply and Supply Gaps in the proposed LNG sector. Understanding the level and accessibility of supply for key occupational classes can provide the basis for identifying solutions in areas of need. 3. Further Research into this Dynamic Issue The LNG industry is highly dynamic and a number of factors could change the labour forecast. The primary factors are the number of projects that will go ahead in B.C. and the capacity of each project. This study has developed two scenarios to manage this uncertainty. After Proponents reach Final Investment Decision in this year and next, these scenarios and should be revisited and inputs updated to improve results. Final Version 22

26 Appendix 1 References 1. Cooke, Richard Brookfield and Jeremy. Modularization of LNG liquefaction plants - the transition to a mainstream project strategy. Chemical Technology. October National Energy Board. LNG Export Licence Application Schedule. [Online] 3. Employment and Social Development Canada. National Occupational Classification [Online] Additional Reference Sources 1. Transport Canada (Karangwa, E.). Estimating the cost of pipeline transportation in Canada. 2. Canadian Energy Research Institute (CERI). Conventional Natural Gas Supply Costs in Western Canada - An Update. December RBC Capital Markets. Canada - Seeking New Markets. May 22, BMO Capital Markets. A&D Drill Bits. October The Oxford Institute for Energy Studies (Songhurst, B.). LNG Cost Escalation. February Woodfibre-Natural-Gas-Pipeline-Project.aspx Final Version 23

27 Appendix 2 Demand Input Ranges Construction Facility: Total Construction FTE Required per Million in Capital Range based on 4 Large LNG Facilities; 2 Trains Total Construction FTE Required per MTPA Range based on 4 Large LNG Facilities; 2 Trains Pipeline: Total Construction FTE Required per Million in Capital Range based on 4 Large Pipelines ; 463km to 850 km in length; inch Total Construction FTE Required per Inch-Mile of Pipeline Range based on 4 Large Pipelines ; 463km to 900 km in length; inch** Upstream: Total Construction FTE Required per TCF Direct Workforce Total Capital per Well $M USD Total Capacity per Well Billions of Cubic Feet Final Version 24

28 Operations Facility: Annual Operations FTE Required per Million in Capital Range based on 4 Large LNG Facilities; 2 Trains Annual Operations FTE Required per Year Range based on 4 Large LNG Facilities; 2 Trains Pipeline: Annual Operations FTE Required per Million in Capital Range based on 4 Large Pipelines ; 463km to 850 km in length; inch Annual Operations FTE Required per Year Range based on 4 Large Pipelines ; 463km to 850 km in length; inch Upstream: Annual Operations FTE Required per TCF per Year Direct Workforce Final Version 25