The Biden administration’s pause on LNG export licenses may have opened the door for competing projects in Canada to gain ground after years of lagging behind.
Canadian officials this month have been playing up their lower emission bonafides in the wake of their southern neighbor’s pause on licenses, in a bid to push for Canada’s liquefied natural gas export projects that have long been stymied by the hurdles of building in remote, rugged areas and the competing economics of abundant U.S. gas supply.
“I note, with interest, that the Americans have said that they might be pausing on their LNG export,” Alberta Premier Danielle Smith said on Bloomberg TV earlier this month. “I look at that as an opportunity for us. If we can be an additional supplier to the world of this vitally important energy source that’s also lower emissions, lower polluting, I think that we have a role to play in being able to expand our markets.”
Canada’s first LNG export terminal, the Shell plc-led LNG Canada, in Kitimat, British Columbia (BC), is preparing for start-up activities this year. It remains on track to begin shipping LNG abroad in 2025. The 14 million metric tons/year (mmty) terminal on the Pacific coast was more than 85% complete at the end of last year.
About a dozen LNG export projects have been proposed for BC, but only three have commercial momentum. Altogether, the four projects would add 31.1 mmty of export capacity, or around 4.1 Bcf/d, if completed, according to NGI’s North American LNG Export Project Tracker.
Pacific Energy Corp. Ltd.’s Woodfibre LNG project is under construction and is targeted to produce at least 2.1 mmty from its single train.
Ksi Lisims LNG Ltd., a co-venture between the Nisga’a Nation, Rockies LNG Ltd. and Houston-based Western LNG, could make a final investment decision (FID) on its 12 mmty floating export project and begin construction this year, with an in-service date in 2028.
Pembina Pipeline Corp. this month announced another delay of the FID for the Cedar LNG project, now not expected until mid-2024 as it hammers out final details of the 3 mmty facility with partners. The deadline had most recently slipped from late 2023 to early 2024.
RBN Energy LLC CEO David Braziel said the effect of the U.S. pause on licenses is already being seen in the market, and the impacts could be long lasting beyond the “months” timeframe the U.S. Department of Energy (DOE) has given for the pause.
“That genie’s out of the bottle once you have shown the market that there could be delays based on political motivations. You’ve already sown that doubt that it could happen again,” Braziel said. “The real takeaway is you’ve already seen certain offtakers say they’re going to pause on making any long-term decisions in U.S. markets. And, frankly, given the amount of money we’re talking about, that’s prudent.”
Now with those risks, a project like Cedar LNG that is fully subscribed could see interest from customers to convert their non-binding offtake agreements to binding contracts, he said.
And if the pause proves longer than expected, some industry players have noted they are well-positioned.
“Should a pause in LNG exports in the United States be extended for a significant period of time, the geographical diversity that our pipelines afford us may well see opportunities both in Mexico and Canada,” TC Energy Corp. COO Stanley Chapman said on an earnings conference call.
The Calgary-based midstreamer’s management also said the Coastal GasLink pipeline was ready to supply feed gas to LNG Canada. If built, Cedar LNG would be a second anchor terminal for the 2.1 Bcf/d pipeline.
Emissions Spotlight
Alberta’s Smith has touted the lower greenhouse gas (GHG) emissions of the country’s fossil fuel heartland and resisted the federal government’s calls to sharply cut national GHGs. She has joined her BC counterpart, David Eby, in seeking out GHG reduction credits for LNG exports that replace coal and oil in other countries.
However, both the province and the federal government were aligned this month in seeing a door open for Canadian LNG exports.
“The American pause…does create some opportunities for Canada,” Canada’s Energy and Natural Resources Minister Jonathan Wilkinson said on Bloomberg TV this month. “But part of that is about opportunities for countries that have taken action to decarbonize the production of oil and gas, and Canada actually has led in that regard.”
Wilkinson welcomed the Biden administration’s decision to pause export licenses because it meant the United States’ policymakers would consider their commitments made to fight climate change.
Canada is the only country that has put in place regulations to require 75% methane emission reductions from oil and gas production and is one of the few that effectively requires liquefaction of natural gas using clean electricity, Wilkinson said. Canada also looks to what its LNG exports are going to be used for because “if it’s not being used to displace coal, then it’s being used to potentially displace future renewables, which doesn’t help us at all from a climate perspective.”
Smith also touted the lower carbon footprint for Alberta natural gas or products made from it, such as ammonia sought out by Japan. The province has one of the best geologies for carbon capture utilization and storage with the capacity to “sequester the equivalent of all of the emissions that have already been produced by man so far,” she said.
If Canada were able to capture the carbon dioxide to produce and export ammonia to meet demand “I think that that opens up an entirely new conversation with our friends in Asia,” Smith said.
In addition to the environmental considerations, the trajectory for global LNG market demand is also a question for U.S. policymakers, according to Wilkinson.
“Increasingly, there is a lot of skepticism about how many more LNG facilities are going to be required and the risk of stranded assets is a real one, and I think it’s incumbent on the United States to have a hard look at that,” Wilkinson said.
