Blog: Bright outlook for BC LNG exports

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Europe’s scramble to line up supplies of non-Russian LNG, and the US scramble to provide Europe with cargoes, offer a bright outlook for future exports of Canadian LNG from BC.

There’s a hefty incentive for the U.S. to boost its LNG exports to Europe: It’s much cheaper than to ship LNG to Asia. Gulf Coast LNG plants are 20-24 days sailing-time to Asian buyers, while BC plants are only 10-12 days away, meaning competitive lower costs — and fewer emissions.

The current rate of chartering a carrier runs from US$85,000 to US$100,000, per day. So the sailing-time savings from BC are hefty, running at $1 million or more per cargo.

As well, the fees for sending a typical US LNG carrier on a return journey through the Panama Canal will soon hit US$980,000. BC LNG exporters don’t have to pay that.

China is building 10 new LNG import facilities. And Japan’s government is pushing for stable supplies of LNG. Mitsubishi Corporation, Japan’s largest LNG firm, has a 15% interest in LNG Canada. Korea also seeks long-term deals, and KOGAS is a 5% partner in LNG Canada.

It’s all good news for BC’s future LNG exporters: LNG Canada, the Cedar LNG project from the Haisla Nation and Pembina Pipeline, the Ksi Lisims LNG project from the Nisga’a Nation, Rockies LNG and Western LNG, as well as smaller but serious players such as the FortisLNG project, Woodfibre LNG and Port Edward LNG.

Small wonder, then, that LNG Canada is already looking into early expansion of  the export plant that it has under construction at Kitimat.

Bryan Cox, president and CEO of the Canadian LNG Alliance, says: “One of the most impactful actions Canada can take right now is to accelerate our LNG off the West Coast.

“The LNG trade is global, and the west coast of Canada, with our shorter shipping times and lowest emission projects, is strategically positioned to supply both developed and developing Asian markets, who are looking to provide reliable energy to their citizens with reliable trade partners.

“Providing more of our lowest emission Canadian LNG to Asian markets faster will not only help to diversify supply away from less reliable trade partners, it will also free supply that is currently going to Asia to go to other high-need markets, like Europe. And, if we get this right who is the biggest winner? It’s Canada.”

There is a potential U.S. competitor for BC, the Alaska LNG project. Alaska has been pushing the idea hard, and the state’s governor has been talking with potential suppliers of natural gas.

(Alaska had a pioneer LNG export terminal, at Kenai. It has been mothballed since 2017, though, and plans are afoot to turn it into an import terminal, bringing in gas to be used at the Kenai oil refinery.)

Another competitor for BC could be the Puerto Libertad LNG refinery on Mexico’s Pacific Coast. Shell (the 40% senior partner in LNG Canada) has already contracted to buy 2.56 million tonnes a year from it, for 20 years.

Meanwhile, U.S. shipments of LNG to Europe are surging in the wake of Russia’s invasion of Ukraine. And “it appears that every spare cubic foot of Canadian natural gas that’s not being used for domestic consumption is being exported to the United States for LNG export.”

Europe is building 20 import terminals, and Canadian natural-gas producers are naturally pushing to turn into action the federal government’s thoughts of LNG exports to Europe from the East Coast.

Nobody is pushing harder than the Alberta government, whose Canadian Energy Centre has been broadcasting the potential of our liquefied natural gas: .

  • There is growing world demand for LNG, from emerging Asia-Pacific economies looking to power economic growth, and from European countries intent on securing a reliable (and non-Russian) energy supply. How Canada can help.
  • World LNG demand this year is expected to hit 436 million tonnes, over 25 million tonnes more than the available supply of 410 million tonnes. That shortfall is seen as a long-term problem.
  • If Canada moves forward with planned LNG facilities, our production could hit almost 53 million tonnes a year by 2035.
  • The world is moving on from coal, but it still helps power the electrical grids in some G7 nations, and is being revived in nations such as Germany because of the cutback in Russian gas imports. Canadian natural gas can provide a cleaner and reliable alternative.

The question now is whether Ottawa can find a way to enable LNG exports to Europe via the East Coast. Ottawa says it will not fund any new LNG export project itself, but is ready to assist negotiations with German buyers. Germany has said it would hope for some resolution by August.

Ottawa’s first public thought was that the existing Repsol LNG import plant in New Brunswick could be converted to an export plant, a conversion that would take some three years. There has been no public comment by Repsol.

The feds also have theoretical eyes on two proposed LNG plants: the Goldboro LNG plant (by Pieridae Energy) in Nova Scotia, and the LNG Newfoundland and Labrador project that would tap and process offshore natural gas, and have a First Nations partner.

(The long-proposed Bear Head LNG project in Nova Scotia is no more, its new owners having announced it now is called Bear Head Energy and will instead produce green hydrogen and ammonia for domestic and export markets.)

If the Repsol revamp goes ahead, it could be shipping LNG to Europe in 2025 — just as LNG Canada begins shipping from BC to Asia.

The Newfoundland and Labrador project was originally aiming for exports to Europe in 2030, but now says it hopes for 2029 or possibly 2028. Pieridae has said planned production, at the earliest, would begin in January 2027. Bear Head LNG originally (in 2004) spoke of spending 32 months on construction.

At this point, the question of pipeline capacity for an East Coast plant or plants remains unresolved. In theory, Western Canadian gas could move on TC Energy’s mainline to Quebec, then cross the border to US lines in New England, then move back into Maritime Canada via the Maritimes and Northeast Pipeline. But there could be capacity problems.

Federal Environment Minister Steven Guilbeault says the East Coast has access to only enough gas to handle one LNG export plant, and he insists that the idea of constructing new gas pipelines in Canada is “not very realistic”.

 

(Posted here 14 July 2022)

 

 

 

 

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