After more than a decade-long surge in activity, Canada has fallen behind in the North American LNG export race despite a bevy of proposed projects, but with the winds of a global energy crisis at their backs, some facilities are now moving forward or even nearing completion.
Since 2011, 24 liquefied natural gas export and import facilities have been granted permits, according to Canada’s federal government. So far, the country only has one large operational facility, a 7.4 million metric ton/year (mmty) import terminal in New Brunswick.
At least 18 export facilities have been proposed in Canada, with 13 proposed for British Columbia (BC) and five proposed for the country’s east coast in Quebec and Nova Scotia. These projects could add 216 mmty of export capacity, or around 29 Bcf/d, if completed.
The first 14 mmty phase of LNG Canada in BC is the only export project under construction in the country. It is expected to enter service around 2025.
Wood Mackenzie's Dulles Wang, director of Americas Gas and LNG Research, told NGI the concentration of proposed projects in the west has contributed to a larger problem holding Canadian LNG production back: cost.
“A lot of these LNG projects on the West Coast are greenfield projects, and they're in a remote location,” Wang said. “You have to build greenfield pipelines to cross two mountain ranges, so the cost limits interest, especially in an inflationary environment.”
While some export capacity is ramping up in the country, Canada is still dwarfed in the short-term by development activity elsewhere in the world.
Projects in Canada are expected to make up less than 1% of the 160 mmty of additional global LNG capacity anticipated to be sanctioned through 2024, according to the latest gas market report from the Gas Exporting Countries Forum (GECF).
The vast majority of additions to global LNG capacity through the decade is expected to come from the United States. U.S. liquefaction capacity is expected to reach 169 mmty by 2027, after two projects were sanctioned this year.
Wang said the prolific and relatively cheap volumes available in the United States has also helped attract most European demand and some price-conscious Asian buyers. The offtakers that have invested in Canadian projects have been portfolio players like Shell plc, which is the primary buyer for LNG Canada.
Although Europe’s current call for more LNG is dominating headlines, projects making progress in Canada are mostly located on the country’s west coast and positioned to serve Asian markets.
“Asian markets have optionality with the U.S. Gulf Coast when it comes to Western Canada projects, but they’re also probably not the best projects for the most immediate source of demand, which is Europe,” Wang said.
So, with all of the possible challenges facing projects in the West Coast, why is the region the center of development progress for Canada?
West Coast Difference
BC has been the center of progress for Canadian LNG developement, with two more projects there expected to be under construction this year.
While Canada hasn’t been able to quickly increase liquefaction capacity, production from the Western Canadian Sedimentary Basin (WCSB) of BC and Alberta has still helped fuel the North American LNG industry.
Wang said the proximity to a large and mature supply base in Western Canada without having to build costly and controversial pipeline systems has probably largely contributed to a glut of West Coast projects.
“Any of these proposed eastern LNG projects would need to secure supply most likely from Western Canada, but that will require pipelines built out through jurisdictions that may not be friendly to more fossil fuel projects,” Wang said.
TC Energy CEO Francois Poirier told NGI in March that the WCSB’s “elasticity of production” would be able to continue providing feed gas for the Gulf Coast while acting as an engine for a growing export industry in Western Canada.
“We’re clearly already working on phase two with our customer LNG Canada that would result in an addition of volumes if they sanction the project of trains three and four,” he said. “The basin will be able to backfill that egress very, very easily.”
Enbridge Inc., which has also made a jump into the export game, estimates there are five LNG projects progressing in Western Canada that could reasonably position the country to export 6 Bcf/d of gas to Asia by 2028.
LNG Canada
The closest to completion is LNG Canada, which has been under construction since 2019. The two proposed phases of the project could create a combined export capacity of 28 mmty. The project also has a 40-year export license.
Shell holds a 40% interest in LNG Canada. Malaysia’s Petronas holds a 25% stake in the project, while PetroChina Co. Ltd. and Japan’s Mitsubishi Corp. hold 15% each, and Korea Gas Corp. has a 5% stake. Its first phase is supported primarily by sales and purchase agreements with China National Offshore Oil Corp. and Jera Co. Inc.
LNG Canada’s Teresa Waddington, vice president of corporate relations, told NGI the project is “now more than 80% complete.” Waddington added that estimation includes work on its equipment at overseas fabrication yards and construction at the site in Kitimat, BC.
Crews managed by a joint venture between JGC Corp. and Fluor Corp. received the first major module last March and have continued to receive shipments at the site.
“We remain on track to shipping our first cargoes of lower-carbon Canadian LNG by mid-decade,” Waddington said.
In April, LNG Canada’s contractor completed the installation of a bridge module required to connect the facility’s trains to utilities and transport the LNG to storage tanks.
After completing an offloading site, Waddington said crews are beginning work on the LNG carrier berthing facility and finishing work on a large storage tank. The trestle of piping from the tank was completed late last month.
Coastal Gas Link
LNG Canada’s construction progress also coincides with the advancement of the 2.1 Bcf/d, 416-mile pipeline system set to feed the project, TC Energy’s Coastal GasLink.
During a first quarter earnings call in May, Poirer said the project is 87% finished and more than 85% of the installed pipeline had been backfilled and was ready for ground restoration.
After several quarters of shifting cost estimates and timelines due to labor shortages and inflation, the firm reported the price tag remained unchanged at around $11 billion.
“We continue to target mechanical completion by the end of the year,” Poirer said during the call.
Between LNG Canada and Coastal GasLink, more than 11,000 direct and indirect workers have been contracted for the two projects.
In March, Poirer told NGI the company’s total combined workforce between Coastal GasLink and its crude oil Trans Mountain Pipeline expansion pushed that number closer to 30,000 workers, roughly three times the estimated regional labor capacity.
Woodfibre LNG
Further down the coast in BC, site work has been underway for the 2.1 mmty capacity Woodfibre LNG just north of Vancouver. Woodfibre, planned near Squamish, BC, is being developed by Pacific Energy Corp. and is backed by Enbridge Inc.
Representatives with Woodfibre told NGI major construction activities are expected to begin on the estimated $5.1 billion project in September. Initial startup is anticipated for 2027. Construction is being managed by McDermott International Ltd., in partnership with local contractors.
The project is supported primarily by a sales agreement with BP plc, which has agreed to take more than 70% of production, according to the firm.
Last summer, Enbridge reached an equity agreement with Pacific Energy, taking a 30% stake in the project and agreeing to help fund the expansion of the pipeline that would help feed the project. The firm has earmarked $1.5 billion in its capital plan for Woodfibre through 2025, executives told investors in March.
Along with receiving environmental reviews from the provincial and federal government, Woodfibre was the first project to be subject to a First Nation’s-led assessment from the Squamish Nation. Developers sought to limit associated emissions from the facility by procuring hydroelectric power from the BC grid and signed agreements to procure all-electric equipment.
Cedar LNG and Ksi Lisims LNG
Cedar LNG, a floating export project by the Haisla Nation and Pembina Pipeline Corp., could be the next BC project to reach FID, according to Pembina. Executives said in February that the partnership is aiming for a decision sometime in the fall.
The 3 mmty terminal proposed for Kitimat gained an environmental assessment certificate to proceed by the BC government in March. The project also netted a 1.5 mmty, 20-year agreement with Arc Resources Ltd, which also agreed to supply feed gas for the project.
Cedar LNG’s price tag is significantly lower than most BC projects at $2.4 billion due to plans to construct a relatively short connection to the Coastal GasLink.
Another First Nations backed project, Ksi Lisims LNG, is currently moving through the regulatory process after being granted initial review approval in March. BC’s environmental regulator said it could take 18 months or more to render a decision on the project.
The 12 mmty project is being developed by the Nisga’a Nation, Rockies LNG LP and Western LNG LLC and involves positioning a floating LNG vessel on Nisga’a territory.
East Coast Headwinds
A prolific number of projects have also been proposed for Eastern Canada over the past decade. Many of those projects have either been stalled or are in the midst of being reconfigured entirely after facing environmental opposition or hurdles related to feed gas and pipeline infrastructure.
Pieridae suspended Goldboro LNG in 2021 after a nine-year effort to progress the estimated $10 billion project. The last iteration of the plan involved creating 1.3 Bcf/d of export capacity in two phases. Pieridae had also included the Mi’kmaq First Nations people as a partner in the project.
Directly after Russia’s invasion of Ukraine, executives said Goldboro LNG could possibly be revived with a combination of governmental support and an equity partner in the project.
However, representatives with Pieridae told NGI the project remains suspended.
“Pieridae remains focused on its 40,000 boe/d upstream business in Western Canada,” Pieridae representatives said.
Meanwhile, Bear Head LNG proposed for eastern Nova Scotia could be on its way to becoming a hydrogen export project. Bear Head Energy Inc., acquired by a unit of Houston-based Buckeye Partners LP last year, received a positive environmental assessment for hydrogen and ammonia production last month.
Originally planned as a 8.7 mmty LNG export terminal, the facility was eyed as one of the few proposed projects that could be positioned to provide Canadian natural gas to the Atlantic basin.
