From a recent TJ column:
One of the strangest arguments being made by opponents of the shale gas industry is that there will be very little economic benefit from developing a natural gas exploration and production industry in New Brunswick. If you read social media, watch YouTube videos or pick up the local newspaper you will find someone talking about the “big American company coming up here taking all the gas and its economic value and leaving us with nothing but environmental problems”.
While there may be legitimate points of disagreement about the environmental aspects of the oil and gas industry, based on hard data a person would be hard pressed to validate an argument that the industry provides limited or no economic value.
According to Statistics Canada, the oil and gas extraction sector in New Brunswick generates 78 cents worth of total gross domestic product (GDP) in the province for every direct dollar of industry output. In areas where the industry is more developed, the value is even higher. Every dollar of oil and gas extraction output in Alberta generates 92 cents of total GDP within the province. Using available data, we can determine the total employment, taxes and other benefits that come from the oil and gas industry.
I guess it may be possible that Statistics Canada is caught up in a vast conspiracy to misinform the public but it is far more likely that opponents are trying every possible angle – fact or fiction – to turn public opinion against the industry’s development.
However, there can be a grain of truth in even the biggest lie. Because New Brunswick does not have a well-developed supply chain and workforce for the oil and gas industry, much of the new economic activity from shale gas development could go to firms and workers that are not based here.
Firms and workers from outside the province could be brought in to do the work and take employment income and profits out of the province. Therefore, in order to maximize the benefits we need to focus on building a supply chain and a workforce based here in New Brunswick.
Last week the consulting firm Deloitte issued a report entitled Shale Gas Supply Chain Opportunities in New Brunswick that details the wide range of business opportunities that would be available to local firms if the industry moves ahead and if these firms are able to build up the specialized expertise required to service the industry. The report states that a typical shale gas well requires $13 million worth of development costs and supports 21.2 full time equivalent jobs.
The report also concludes there is significant potential for local New Brunswick firms to benefit from the industry. Firms are needed to provide a variety of services including environmental surveying, equipment rental, safety planning, site clearing, construction and lease agreement negotiation, land preparation, drilling, cementing, casing, wellhead installation, pipelines and maintenance.
Deloitte completed a survey of New Brunswick firms to determine their readiness to take advantage of the opportunities. The survey found that 93 percent of firms were either ready or willing to be a supplier to the industry. More than three out of five firms surveyed believed their companies would benefit from providing services to the shale gas industry.
However, because New Brunswick doesn’t have much history with the oil and gas sector, only a few firms currently have the expertise to be able to offer services to the industry.
New Brunswick companies need to start thinking about these opportunities now and figuring out how to take advantage.
It has been a while since a supply chain opportunity has come along with as much potential. The Deloitte study confirms the economic benefits could be distributed widely if New Brunswick firms step up and take advantage.