Market Snapshot: Exploring Canada's Future in LNG Exports

Release date: 2024-09-04

Since the end of 2008, natural gas prices in Asia and Europe have been significantly higher than those in North America (Figure 1).^{Footnote 1Footnote 2} While some major gas markets produce little or no natural gas domestically, Canada and the United States (U.S.) produce substantial quantities of tight gas, shale gas, and gas associated with tight oil and shale oil. Abundant gas production keeps North American markets well supplied, resulting in generally lower gas prices. These lower gas prices motivate North American natural gas producers to export liquified natural gas (LNG) to global markets.

Figure 1: Global LNG and Natural Gas Prices

Canadian LNG projects

Western Canada’s proposed LNG projects (Figure 2) aim to capitalize on the region's abundant, low-cost natural gas resources by exporting LNG to global markets where demand is high, and prices are more attractive. Canadian LNG projects offer notable benefits compared to those on the U.S. Gulf Coast, but they also face some challenges. Western Canada’s proximity to some of northeast Asia’s largest LNG importers like China, Japan, and South Korea^Footnote 3, reduces marine shipping costs compared to LNG export terminals on the U.S. Gulf Coast. Western Canada’s relatively colder climate reduces the amount of energy required to cool and liquefy natural gas. However, constructing new LNG projects on British Columbia’s (B.C.) west coast, along with the necessary supply pipelines, can be both costly and time-consuming. Canadian LNG facilities and pipelines are often built in remote areas with difficult terrain and coastline challenges, whereas the U.S. Gulf Coast is already well-developed for this industry, with a substantial existing pipeline network to transport natural gas supply to new LNG facilities. Several Canadian LNG Projects, including the associated pipelines, are located on traditional Indigenous lands, which is an important consideration in Canada.

Figure 2: Upcoming and proposed LNG facilities in Western Canada

LNG Canada, Woodfibre LNG, and Ksi Lisims LNG each hold 40-year LNG export licenses, while Cedar LNG and Tilbury LNG have 25-year LNG export licenses.

Two projects currently under construction (LNG Canada Phase 1 and Woodfibre LNG), along with the newly approved Cedar LNG project, will collectively produce around 19 million tonnes per annum (MTPA), or approximately 2.5 Bcf/d, of LNG by 2028.

If constructed, LNG Canada Phase 2, Ksi Lisims LNG and Tilbury LNG Phase 2 would add an additional 28.5 MTPA, or approximately 3.75 Bcf/d of LNG.

By 2029, the total LNG production capacity could reach approximately 47.5 MTPA, or about 6.25 Bcf/d of LNG.

JX LNG Canada Ltd. plans to build a new inland LNG plant named Summit Lake PG LNG near Prince George, B.C. This project intends to export LNG using specialized ISO containers^Footnote 9 transported by rail to Prince Rupert, from where the LNG will be shipped to Asian markets. The projected LNG export volume is 0.36 Bcf/d, with a total capacity of 2.7 MTPA. Currently, the Summit Lake PG LNG project does not have an LNG export license and has not yet applied for one.

A growing number of LNG project proponents are focusing on reducing greenhouse gas (GHG) emissions associated with their facilities. Key strategies for achieving this include electrifying processes and utilizing renewable energy sources. Traditional LNG facilities often rely on gas turbines and other combustion engines for processes like gas compression and liquefaction. By switching to electric-driven compressors and motors powered by renewable electricity^Definition*, facilities can significantly reduce direct GHG emissions. Getting electricity from renewable energy sources like hydroelectric, wind, or solar power ensures that the energy used in LNG facilities is low carbon. Many Canadian LNG projects are strategically located to access abundant renewable energy resources.

• While LNG Canada Phase 1 will utilize natural gas turbines for the liquefaction process, LNG Canada is actively working on electrifying certain processes, especially for the proposed Phase 2. The plan includes transitioning from natural gas-powered turbines to electric motors as more renewable power becomes available. This shift will reduce reliance on fossil fuels and help lower the carbon intensity of LNG production. LNG Canada has secured a power agreement with B.C. Hydro to use renewable electricity for a portion of the facility's energy needs.
• Woodfibre LNG will use electric motors powered by renewable electricity from B.C. Hydro, which will make the project one of the lowest emission LNG export facilities in the world.
• The proposed Cedar LNG facility will be powered by renewable electricity from B.C. Hydro as well and will also be one of the lowest-emission LNG facilities in the world.
• The proposed Ksi Lisims LNG facility would have one of the lowest carbon intensities of large-scale LNG export projects in the world, utilizing several technologies to reduce carbon emissions, including use of renewable hydropower^Definition* from the B.C. electricity grid.
• Tilbury LNG facility is powered by renewable hydroelectricity, which means it can produce LNG that is nearly 30 per cent less carbon intensive than the average global LNG.

LNG Export Licences in Canada

While only a few LNG export projects are under construction in Canada, 29 LNG export licences are currently valid^Footnote 10. Exporting any natural gas from Canada requires a short-term export order or a long-term export license. The National Energy Board (NEB) granted these until 2019, when the NEB was replaced by the CER, which now reviews export license applications and issues export licenses and orders^{Footnote 11Footnote 12}.

Date modified:

2024-09-06