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NOVEMBER 24, 2013
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FINAL EDITION
A DIVISION OF
POSTMEDIA NETWORK INC.
I
SECTION C
ANALYTICS
H CKEY
Breaking down the science behind
the stats WHITE TOWEL SECTION B
Holiday Gift Guide
The Chevron-led Gorgon LNG plant in Western Australia. PHOTO COURTESY OF CHEVRON
Lessons from Down Under
LNG LNG
What B.C. can learn from Western Australia,
where state debt and the cost of living are both
on the rise as $100 billion gets poured into the
booming LNG industry PAGE A8
#Up to $5,000 Honda cash purchase incentive is available select 2013 models. Honda cash purchase incentive will be deducted from the negotiated price before taxes and cannot be combined with special lease or fnance offers. Dealer may sell for less. Dealer trade may be required. Prices and/or payments shown do not include representative PPSA lien registration and lien registering agent`s fees (fees may vary by province),
which are due at time of delivery. For all offers license, insurance, applicable taxes and registration are extra. Offers valid from November 1st to December 2nd, 2013 at participating Honda retailers. Offers valid only for British Columbia residents at BC Honda Dealers locations. Offers subject to change or cancellation without notice. Terms and conditions apply. Visit www.bchonda.comor see your BC Honda retailer for full details.
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SUNDAY, NOVEMBER 24, 2013 A8
PERTH, WESTERN AUSTRALIA
S
tanding at one of the worlds
most isolated vantage
points, Ben and Pete look
south to Antarctica from
stunning Greens Pool on Western
Australias south coast.
Their backs are to the camera.
A confidentiality agreement with
their employers has seen to that.
But the pair are willing to talk off
the record about their lives as high-
paid fly-in-fly-out (FIFO) workers
on the $100-billion worth of liq-
uid natural gas plants being built
in W.A.
Its a good life. Pete, 32, a boiler-
maker on Chevrons $52-billion
Gorgon project, earns $150,000 a
year and gets three months off.
Ben, 35, a member of the powerful
Marine Union of Australia (MUA),
works on a tug boat operating out of
Dampier on the northwest coast of
W.A. and pulls in $170,000 a year.
I worked on Pluto (Woodside
Petroleums recently completed
LNG plant) and Gorgon is starting
to take off now, said Pete, dressed
in the Australian standard sun-
glasses, surf-brand T-shirt, board
shorts and flip-flops.
Ben and Pete are happy with their
lot. The two men own houses, nice
vehicles and boats and travel at will.
FIFO workers make up 50 per cent
of the W.A. resource industry work-
force, taking their wealth every two
weeks from the work site to wher-
ever they live.
But the pair agree there is a dark
side to their success: fixed income
workers in traditional labour fields
such as policing, teaching and nurs-
ing are facing soaring living costs.
Its wreckin Australias cost of
living, said Ben, with a distinctive
Aussie drawl. If you arent in the
pie, how do you survive?
The British Columbia government
has pegged the provinces future on
an LNG industry it claims will wipe
out provincial debt, create tens of
thousands of jobs and generate
billions of dollars over the next 30
years in taxes and royalties.
But as W. A.s economy has
boomed, so too has the cost of liv-
ing.
House prices tripled between
2000 and 2013 and the small things
cost more. A cup of coffee in Perth
sets you back $5 and a jug of beer
costs at least $21.
Rents in the LNG-driven north-
ern towns of Karratha and Damp-
ier can go for $6,000 a month for a
three-bedroom house while Perths
rental vacancy rate is close to zero.
This makes life harder for people
on fixed incomes.
David Carrigg
CITY
EDITOR
dcarrigg@
theprovince.com
twitter.com/
davidcarrigg
GREENS POOL, Western Australia: Pete, left, and Ben are high-paid fly-in-fly-out workers on the states LNG developments. PHOTOS BY DAVID CARRIGG
B.C. needs to be wary of hikes
in cost of living and provincial
debt, experts warn
Price to pay
for
LNG
d r e a m
|
NEWS
*
SUNDAY READ
| THEPROVINCE.COM
SUNDAY, NOVEMBER 24, 2013 !"
Project developers are struggling
to contain costs and despite W.A.s
massive and growing LNG indus-
try, provincial debt has never been
higher.
W.A. is where British Columbia
should look to learn how to and
how not to transition into an
LNG economy.

Peter Strachan is a Perth-based
LNG analyst who has no doubt
that Asian-driven demand for LNG
will increase with the enormous
amount of the product set to come
on line over the next decade.
But the lanky MBA and former
world traveller said the B.C. gov-
ernment must be mindful of infla-
tionary pressures that come with
LNG mega-projects.
What you will see in B.C. are
the guys arriving wearing big belts
with big buckles and hats earning
big bucks, said Strachan, sitting
in a caf overlooking Perths Cot-
tesloe Beach.
Those are the guys who will put
pressure on housing, schools and
infrastructure like what weve seen
in Perth. You have pressure from
the FIFO guys, like chefs making
$300,000 a year, but there are also
thousands of engineers working in
Perth and all their kids go to private
schools. So the private schools get
bigger and fees go up. But youve
still got people on a fixed income
making $74,000 a year.
So five per cent of the communi-
ty are better off because of higher
incomes from a high level of invest-
ment in a small sector of the com-
munity, in this case LNG. Maybe 10
per cent break even and the oth-
er 85 per cent are worse off. They
dont get the same sort of income
increases as those directly involved
in the area of investment, yet their
cost of living rises. Costs of rent,
food service and utilities rise for
everyone as more infrastructure
is required to meet the needs of a
rapid jump in population.
W.A. has the fastest growing pop-
ulation of any Australian state, with
an increase of 85,000 in 2012 to 2.5
million.
Strachan also warns British
Columbians to be wary of any gov-
ernment promise that LNG royal-
ties will wipe out provincial debt.
He said when the first shipment
of LNG departed W.A. shores for
Japan in 1989 the state government
had no debt.
As of June 2013, W.A.s debt was
$18.4 billion and is expected to
increase to $28.4 billion by 2017
due to infrastructure spending.
Last Tuesday, Minister for Nat-
ural Gas Development Rich Cole-
man said B.C.s $40 billion debt will
be wiped out in 15 years if four LNG
plants are built.
Coleman said some countries,
while not pointing to Australia, had
used revenues from LNG to go on
a spending spree and thats some-
thing his government would avoid.
Its about how you manage your
operations, Coleman said.
B.C. Premier Christy Clark is cur-
rently in Asia pitching the prov-
inces LNG dream while the B.C.
government works on a corporate
income-tax regime that would
apply to LNG exporters.
Those details will be presented
by the end of the year to the vari-
ous groups interested in develop-
ing an LNG plant.
Coleman accepted the risk of
cost-of-living rises in the wake of
construction investment but add-
ed once that five-year phase is over,
the economy would settle down.
#$%&%'( *+,-.#%!
Size: 945,000 square kilometres.
Population: 4.6 million.
Population of capital (Vancouver):
2.5 million.
Provincial debt: $40 billion.
Driving distance from Vancouver to
proposed LNG plants: 1,500 kms.
/0'&0$1 !-'&$!,%!
Size: 2.5 million square kilometres.
Population: 2.5 million.
Population of capital (Perth):
1.9 million.
Provincial debt: $28 billion.
Driving distance from Perth to LNG
plants: 1,500 kms.
What youll
see in B.C. are
the guys arriving
wearing big belts
with big buckles
and hats earning
big bucks.
PETER STRACHAN
LNG ANALYST
HENDERSON, Western Australia: Pre-fabricated cylinders will be placed on a barge and towed for three days up to the Chevron-led Gorgon
LNG development on Barrow Island off W.A.s northwest coast.
!"
Maps not to scale
THEPROVINCE.COM |
*
'-12!3 $0!2
|
10/'
|
Continued on Page A10
largest city (Vancouver)
SUNDAY, NOVEMBER 24, 2013 A10
|
NEWS
*
SUNDAY READ
| THEPROVINCE.COM
He also added that, unlike Aus-
tralia, which has a limited labour
pool leading to higher wages, B.C.
will have access to a North Ameri-
can workforce. The government is
also doing its best to ensure there
are enough tradespeople for the
expected LNG construction. The
key LNG proponents are expect-
ed to make their Final Investment
Decisions by the end of 2014. That
would mean the first shipment of
LNG would occur in 2019.
Simon Fraser University eco-
nomics professor Rick Harris
said the W.A. government need-
ed to spend a lot more on infra-
structure than he expects will
need to be spent in B.C. He said
it is impossible to know right now
how much the government will
earn from LNG and what impact
that will have on provincial debt.
It depends on the price of nat-
ural gas and a lot of things. I have
no idea how you can forecast it,
he said.
Harris is fairly sure, though, that
the cost of living will go up, espe-
cially in Prince George, Terrace,
Kitimat and Prince Rupert.
Booms raise incomes and some
people get left behind, he said.
Strachan thinks Canadas polit-
ical stability, lower labour costs
and cold climate which make
it cheaper to chill the natural gas
to LNG form will work in its
favour when it comes to LNG, but
said infrastructure spending will
be unavoidable.

An example of government infra-
structure cost in W.A. is the $370
million, 40-hectare Common User
Facility at the Australian Marine
Centre in Henderson, 45 minutes
drive south of Perth.
The AMC CUF was created in
2003 as a base for businesses
wanting to compete for LNG ten-
ders and maritime projects. Thou-
sands of tonnes of equipment
from monster concrete caissons to
complex control gear for the gas
coolers is put together at the
AMC and loaded on barges for
the three-day trip north.
In W.A. everything is huge, from
the $100 billion being spent on
LNG, to the 200-tonne capacity
road network, the 12,000-tonne
floating dock at the AMC and the
$11 hamburger sold at Perths
Scarborough Beach.
Gas is driving a massive pro-
portion of our work, said Jona-
than Smith, general manager at
the AMC. They call it oil and gas,
but really its gas and oil.
Smith said the biggest chal-
lenge for the companies devel-
oping LNG plants in W.A. (which
includes Shells first floating LNG
facility) is the remoteness of the
projects and the resulting impact
on costs, including supply-chain
logistics and labour.
Without recognizing these
issues, costs can be very difficult
to control and that causes prob-
lems, he said.
Alberta-based project manag-
er Kevin Wilson, who spent 18
months working in the Western
Australian resource sector, said
theres another thing that can
impact productivity.
Its called mateship.
Wilson told The Province the
culture of mateship is based on
a strong union movement and a
general disdain for authority.
Aussies are not like us, Wilson
said. If someone is tapped on the
shoulder to supervise they are
loath to do it because they dont
want to supervise their mates.

Mark Pownall, executive editor
at Business News Western Austra-
lia, has been writing and editing
LNG news since the late 1980s.
Pownall is well dressed by Auss-
ie standards, with white shirt and
cufflinks. He stands amid his six-
person reporting team debating
the cover of the next print edition.
Whats news today is Shells bid
to build the largest ship ever to liq-
uefy gas offshore.
Its a ship, but they are calling
it a barge to get around the MUA.
Stupid things like that go on here,
said the laconic Aussie in BNs
North Perth boardroom.
He said construction costs
remain a huge issue for the gas
players developing LNG plants.
Gorgon started at $43 billion
and its already more than $52
billion. Steel has become more
expensive and you have 6,000
people working there for three
years and every guy is working
nine months a year. No one earns
less than $150,000 a year and lots
make $300,000 a year.
Pownall said its only since 2005
that LNG has been on the publics
mind as people tried to figure why
their cost of living was going up.
Its been largely overlooked, but
we are set to become the second
largest LNG exporter in the world
behind Qatar, he said.
B.C. might be coming late to
the party, but the partys not over.
Why wouldnt you want to diver-
sify the economy with cleaner
energy? Its a stable industry and
insulated and long term. Even if
the U.S. wants to completely open
up its doors there is still strong
demand.
Dana Benner, Calgary-based
head of research for Altacorp,
is closely monitoring B. C.s
ambitious LNG plans and said
action needs to be taken quick-
ly. He agrees with Pownall about
demand, but warns things need to
move swiftly.
There is enough demand as
long as B.C. moves in an efficient
way. There is a window and a lot
of competition, he said.
Pacific Northwest LNG

is
led by the Malaysian gov-
ernments PETRONAS and is
expected to produce 10 mil-
lion tonnes per annum at a
plant on Lelu Island north of
Prince Rupert. Initial engi-
neering work is underway
with a Final Investment
Decision expected in late
2014. The project would
begin export at the start of
2019.
Kitimat LNG

is a Chevron-
led joint venture investi-
gating construction of a 10
mtpa LNG plant on Hais-
la Nation land at Bish Cove,
west of Kitimat. The project
has an export permit and
has been in the works since
2004 when it was initially
proposed as an LNG import
terminal. Front-end engi-
neering work is underway.
LNG Canada

is spearhead-
ed by Shell Canada as a
12 mtpa facility alongside
the Rio Tinto Alcan smelt-
er in Kitimat. The project
recently submitted a Proj-
ect Description to the B.C.
and federal governments
and public consultation is
underway.
Prince Rupert LNG

is pro-
posed by the UK-based BG
Group as a 14 mtpa facility
on Ridley Island near Prince
Rupert. A Final Investment
Decision is expected in
2015.
Aurora LNG

is a Chinese-
government led (CNOOC)
project that recently won
access to crown land at
Grassy Point north of Prince
Rupert. This project does
not have an export permit
and the CNOOC CEO said
this month there is a long
process ahead.
Key LNG
contenders
Peter Strachan is a Western Australian
LNG analyst. Pictured at Perths Cottesloe
Beach, Strachan warns LNG prosperity has
not led to reduced provincial debt in W.A.
B.C. might be
coming late to
the party, but the
partys not over.
MARK POWNALL
EXECUTIVE EDITOR, BUSINESS NEWS WA
HENDERSON, Western Australia: A transport ship is moored
at the end of the 12,000-tonne floating dock at the Australian
Marine Complex south of Perth.
Jonathan Smith is general manager at
the Australian Marine Complex. In the
background are concrete caissons being
used on Gorgons LNG wharf.
Mark Pownall, executive editor at
Business News Western Australia, says
construction costs are a huge issue for
LNG developers.
From Page A9