Opening the Northern Gateway

Alberta and BC will spend more than $1.2 billion on goods and services to build Northern Gateway, which means manufacturers are in for a big pay day.

Building the pipeline will diversify Canada’s energy markets and give the GDP a considerable boost.

As the economic engine powering Canada’s economy shifts from manufacturing in Ontario to energy in the West, the Harper government is placing a much greater emphasis on diversifying exports of Alberta’s oil sands production.

Despite critics from all over the world who call Alberta’s resource “dirty oil,” there is a thirst for energy in emerging economies such as China and India. And the need for Canada to diversify its markets is becoming even more acute with the resistance to the Keystone XL pipeline in the US and the likelihood demand for Canadian energy there will decline as the country develops its own energy resources.

The Harper government is betting on Enbridge’s $5.5 billion Northern Gateway to help Canada bust out to far eastern markets, but the Calgary company has to wade through political and environmental obstacles as thick and gooey as the heavy crude and condensate the pipeline would carry. There is much work to do before oil sands production flows to the BC coast and is shipped by super tanker to Asia.

The project has been in approval purgatory since May 2010 with enviro-critics citing concerns about the fragile forests of BC’s interior and the hard-to-manoeuvre seaway from Kitimat, BC’s marine terminal. First Nations oppose a pipeline crossing their lands, and BC premier Christy Clark is manoeuvring for a bigger share of the profits. Add to that a recent 10-week extension tacked onto the project’s National Energy Board.

Looking beyond all the huffing and puffing from politicians and other interested groups, what’s in it for Canadian manufacturers, particularly those closely placed in the West?

To start, there would be millions of dollars worth of contracts for manufactured inputs, such as valves and pipes, and boosted demand for heavy equipment, trucks and other vehicles during the building and throughout the pipeline’s 30-year lifetime. Enbridge claims the pipeline would require $35 million in manufactured goods, such as tubular pipe, pressure vessels and pumps, just in central BC. Jean Michel Laurin says manufacturers here won’t be left out of the mix.

“I have no doubt it’s going to be a fairly open market to provide companies bidding on contracts a level playing field,” says Laurin, president of global policy at Canadian Manufacturers & Exporters (CME).

Indeed, Alberta is a place Canada’s manufacturers need to be.

“The resources sector has been driving growth in manufacturing, it’s what kept a lot of those companies afloat since the recession,” says Laurin. “Companies are asking ‘where’s the growth?’ It’s in the natural resources and energy sector.”

Ontario, in particular, would benefit significantly according to Robert Mansell, an economist at the University of Calgary.

“When there’s expansion in the Canadian economy, a lot of that goes back to Ontario because there’s a lot made there. Increased sales of cars, trucks and heavy equipment are the result of expansion in the resource sector.”

Enbridge’s twin-pipeline project would carry up to 525,000 barrels oil sands heavy crude and condensate 1,177 kilometres from Bruderheim, Alta. to a marine terminal in Kitimat, BC each day. The proposed terminal includes two ship berths and 14 reserve tanks for excess oil and condensate supplies. Enbridge, pending approval, hopes to have the pipeline online by 2016.

Should the project be approved by 2013, it would create more than 1,000 jobs and generate upwards of $80 billion in tax revenues throughout its 30-year lifetime.

The project may even be gathering support from unexpected allies; provinces looking for a boost from the oil sands.