Chinese-constructed LNG modules cause controversy among Canadian steel industry groups

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By Kristen Frisa
Ontario Construction News staff writer

After the federal government’s announcement that it would support the purchase pre-constructed modules for use in British Columbia to keep two liquified natural gas (LNG) projects on track, the Canadian steel industry had some things to say about the move.

On August 9, finance minister Bill Morneau welcomed Woodfibre LNG’s announcement that it has placed an order for a cryogenic head exchanger, which is a required element for the construction of its LNG project near Squamish, and announced that the government would provide full duty remissions on steel from China.

The imports are modularized, meaning they will be built in small pieces that are easily shipped with equipment and components already installed. The statement from the government said the project would result in 600 jobs, 100 of which will continue when the project is operational.

The Woodfibre LNG project will process and export liquified natural gas, and is expected to cost between $1.4 and $1.8 billion, while LNG Canada is a $40 billion project in Kitimat that includes liquification and a pipline and marine terminal.

“In keeping with previous public statements that trade barriers would not be permitted to stand in the way of these historic private sector investments, the Government is providing relief from duties on fabricated steel contained in modules for the Woodfibre LNG project as well as the previously announced LNG Canada project, which is the single largest private sector investment in Canadian history,” the statement read.

The duties that would ordinarily be levied on Chinese steel have been implemented by the Canadian International Trade Tribunal (CITT) under the Special Import Measure Act (SIMA).

The Canadian Institute of Steel Construction (CISC) came out with a statement on August 20, saying the feds handed $42 billion in construction projects to China at the expense of Canadian workers.

“The announcement was very disappointing,” said Ed Whalen, president & CEO of the Canadian Institute of Steel Construction in the statement. “These two projects, if done in Canada, would have created hundreds of thousands of construction jobs for all trades across the country. Projects like these employ skilled workers from all over Canada and not just in the local area. This is a hundreds-of-thousands-of-jobs-lost kind of mistake.”

“The government has called SIMA and the rulings of the CITT “trade barriers” in their announcement! For the government of Canada to call their own fair trade process a trade barrier is dumbfounding,” said Whalen.

The feds say importing the modules was a crucial way to keep the project going. “These modules are key components used in the construction of LNG facilities, and relief is being provided because modules of the size and complexity required for these projects are not available in Canada.”

CISC argues that the jobs could be done in Canada.

Canadian Building Trades Unions (CBTU) came down the middle of the line on issue, saying it understands the imperative to keep LNG projects moving, but the lack of Canadian resources to construct equipment in-house is cause for concern.

“Our workers build Canada, and with changes in the way we do business, we need to work closely with industry and government on how to balance progress while protecting Canadian jobs,” said Arlene Dunn, director of Canada’s Building Trades Unions.

“The use of modules at the LNG plant may very well address a lack of domestic supply but these are not the last modules to be used in Canada. Government must sit with industry and labour, as equal partners and discuss how to develop a plan on how our domestic industry and subsequently Canadian workers, can meet the needs of these projects in the years to come,” Dunn said.

The steel coming from China represents about a third of the amount required for building an LNG plant, and overall keeping the projects running is important to Canada. LNG Canada and Woodfibre LNG are projected to create 10,000 jobs in the country.

“We appreciate the measures the Government has taken to protect the Canadian steel industry, and while the use of these modules may be a necessary step to ensure these two projects move forward, it also sheds light on the lack of capacity that currently exists in Canada,” Dunn said.

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