Economic Impact Assessment of the Development of Utica Shales - An Important
Source of Employment and Major Economic Benefits for Quebec
SAINT-HYACINTHE, QC, Oct 7 /CNW Telbec/ - The Quebec Oil and Gas Association and SECOR today released the results of a study by SECOR on the economic benefits of the Utica Shales, conducted in the fall of 2009.
This study provides an analytical look at the economic impact of the shale gas industry in Quebec. The Quebec Oil and Gas Association asked Secor to estimate the economic impact of exploration and exploitation of shale gas, and more specifically, its impact in terms of jobs and revenue for the Government of Quebec.
Two scenarios have been prepared. The base scenario is based on the drilling of 150 wells per year from 2015, while the second scenario assumes that activity will stabilize at 600 wells per year from 2016. In both cases, it has been decided that there will be six wells drilled per drill site. The creation of 5,000 to 19,000 jobs is then foreseeable.
According to Secor's analysis, in full operation the drilling of one well will generate $1.85 million in value added to Quebec and some 33 jobs annually. Under the base scenario, in 2015 the production of 150 wells will create $278 million in value added (GDP) and close to 5,000 jobs. This analysis is based primarily on the input-output model of l'Institut de statistique du Québec.
Moreover, the production phase of a well, which stretches over 50 years, creates relatively few jobs; 28 jobs per 100 wells in production. The 293 wells forecasted in the base scenario in 2015 would create 82 jobs. It is royalties that become important during the production phase. To identify its importance, the Secor study was based on gas prices in the fall of 2009, six dollars per MCF (thousand cubic feet) and a royalty rate of 10%. The average royalty per well under these assumptions would be around $150,000 per year.
At this stage we cannot predict the level of industry development, as the potential in Quebec is not sufficiently characterized. If a thousand wells are in production on 150 sites, the Government of Quebec could receive $150 million in royalties annually. Under the second scenario, the exploitation of 7,000 wells, following the assumed hypothesis, would translate into annual royalties slightly above $1 billion.
The study of benefits does not include expenses incurred for transportation and distribution of the natural gas extracted, corporate taxes paid by the industry and its suppliers, nor does it integrate the dynamic or structural effects for the economy of Quebec. The principal author of the study is Mr. Daniel Denis, partner at Secor.
About SECOR
SECOR has been active as a strategic advisor to Quebec businesses and public and parapublic organizations for 35 years. SECOR has become the largest independent consulting firm in Canada with offices in Montreal, New York, Paris, Quebec City, Toronto and Vancouver. It has earned an international reputation as a strategic management consulting firm.
About QOGA
The Quebec Oil and Gas Association, established in April 2009, aims to continue the development of an industry in Quebec that will be able to produce significant economic benefits for the regions. The QOGA presents and promotes the interests of a responsible and active industry to contribute to energy diversification in Quebec, with respect to the environment and communities. Its members' mission is to work on the development of Quebec's energy resources while promoting economic development in Quebec.
For further information:
Stéphane Dion
NATIONAL Public Relations
Phone: 418-648-1233, ext. 235
Mobile: 418-208-1529
Email: [email protected]
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