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There is still time for Canada to join the LNG export party

Mon 01 Apr 2019 by John Snyder

There is still time for Canada to join the LNG export party

Canada has yet to build an export terminal, but when it does it should find ready buyers for its LNG, says John Snyder 

Canada is the world’s fifth-largest producer of natural gas – accounting for about 5% of the world’s production – but surprisingly, it has yet to join the travelling export party from North America overseas.

Historically, Canada exported most of the natural gas it did not consume terrestrially to the US via pipeline, but the US shale gas revolution of the last decade has dramatically cut US import needs.

Since 2007, Canadian natural gas exports to the US have fallen by 25%. Data from the US Energy Information Administration (EIA) shows that Canada exported nearly 110,000 m3 of natural gas in 2007 as compared with around 80,000 m3 of natural gas in 2018.

The decline comes at a time when US natural gas consumption is booming, up a whopping 10% in 2018 over 2017, according to the International Energy Agency.

With the United States losing its appetite for their product, Canadian gas producers have identified receptive markets in Asia and Europe. In order to reach those more promising shores, however, the country needs to build LNG export terminals, and multiple plans are underway to do just that. 

Currently, there are some 18 LNG export terminals proposed or in development in Canada; five in eastern Canada and 13 in British Columbia. Two facilities have received the green light to proceed with their LNG export projects in British Columbia. One is the US$40Bn LNG Canada facility with a capacity of 26 mta and the other is the US$1.4Bn Woodfibre LNG facility with a capacity of 2.1 mta. Both have start dates of 2025.

In eastern Canada, an FID on Goldsboro LNG in Nova Scotia is expected this year. The facility would have a capacity of 10 mta of LNG with a commercial start date of 2023.

Not all of the proposed LNG export facilities will be built in Canada, but the ones that are will enjoy significant market advantages.

Advantage 1: LNG export facilities in Canada are closer to customers than the competition.

LNG export facilities in eastern Canada would be approximately 2,000 nautical miles (3,700 km) closer to Europe than their counterparts in the US, not to mention Australia, Malaysia and Qatar, while LNG export facilities in western Canada would be about 5,000 nautical miles (9,300 km) closer to Asia than US Gulf export terminals.

Advantage 2: LNG carriers sailing from Canada to Europe or Asia would not have to pass through the Panama Canal, avoiding expensive tolls.

Advantage 3: Canadian LNG export terminals in British Columbia are close to vast supplies of shale gas and tight gas resources – within easy reach of about 50% of the gas produced in Canada.

Canadian LNG export projects aren’t without challenges, of course. Most face major infrastructure and pipeline construction investment needs, environmental regulatory challenges and increased competition in the LNG sector from the US and abroad.

Ameliorating some of the competitive crunch, however, the market for LNG and natural gas continues to grow steadily. Energy demand worldwide is on the rise – it grew by 2.3% last year – and natural gas has emerged as the fuel of choice in many sectors, meeting 45% of the rise in energy consumption, according to the US EIA.

Oil major Shell expects growth in LNG demand to continue around the world, led by Asia and Europe. LNG continues to be the fastest-growing gas supply source, according to Shell, with an expected compound annual growth rate of 4% a year between now and 2035.

With enough natural gas reserves to sustain production levels for an estimated 300 years, Canadian LNG export terminals will be joining the game for the long term. They might be joining a bit late, but with a growing market and handy proximity to Asia and European markets, Canadian LNG export terminals should not have trouble finding a home for their exports.

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