Over the last year, the U.S. has been ramping up its natural gas production, with plans to develop several more LNG facilities in the south of the country. But it seems like it’s not the only country to have major gas ambitions, as Canada continues to work on a massive new export facility. Canada has long been planning to become an LNG exporter and thanks to the new development, its ambitions are ever closer, with the potential of supporting North America’s dominance in the global gas industry.
Oil industry leaders in Canada have long pushed for the construction of an LNG export facility to ensure the country’s position in the global energy market, as the demand for crude, particularly Canada’s carbon-intensive oil sands, begins to wane. The global shift away from Russian gas supplies has left the door open for alternative producers and exporters. The CEO of Canadian oil major Enbridge, Greg Ebel, stated: “Natural gas is a critical component in so many different regions of the world and will continue to do so as part of our sustainability goals, as part of backup for renewables . . . More and more people want to have a better lifestyle and that means cheap, affordable, secure energy… And, inevitably, for decades and decades to come, that is going to involve natural gas and oil.”
Canada is the world’s fifth-largest oil and natural gas producer, with its gas output increasing over the last decade. The country’s gas sales volumes are expected to rise to around 21 billion cubic feet (bcf) per day by 2030, an increase from 17.5 bcf per day at present. However, its export market has lagged behind other gas-producing countries. Ebel believes that Canadian gas exports could replace coal used in other countries to help lower emissions. He said, “Even with the U.S. expansion, there’s still plenty of room for Canada to be a serious player.”
Canada is now setting its sights on becoming a major LNG exporter in the coming years. LNG Canada, a joint venture of Shell, PETRONAS, PetroChina, Mitsubishi Corporation and Korea Gas Corporation has been developing Canada’s first LNG export facility in British Colombia. The group announced in June that the project’s construction was more than 80 percent complete and they were preparing for it to commence operations. It is expected to have a production capacity of 14 million tonnes a year, with the potential for expansion in the future.
Once the facility is completed, the plant will include a natural gas receiving and LNG production unit, a marine terminal with the capacity to accommodate two LNG carriers, a tugboat dock and LNG loading lines, as well as LNG processing units, storage tanks, a rail yard, a water treatment facility, and flare stacks. The first phase is expected to begin shipments in 2025, which will be followed by the development of a second phase to double annual capacity to 28 million tonnes.
The project was originally planned as a way of transporting large quantities of methane gas from Canada to Asia. However, following the Russia-Ukraine war, and the rush to find alternative gas supplies, the multibillion-dollar project has evolved differently. The facility is now being developed to have two units to convert methane into a liquid form for shipping.
The facility will use hydropower to run the turbines that cool the gas to liquid form, aiming to reduce carbon emissions. But this will require the installation of hundreds of kilometres of new transmission lines to reach the plant’s remote location on the northwest coast. LNG Canada has been in discussions with the province and BC Hydro, a state-owned power corporation, about managing the site’s hydropower needs. The CEO of LNG Canada, Jason Klein, stated “All the parties understand that further electrification of our industry will benefit B.C. and the Premier has been quite clear and consistent that he wants to see progress made on this file.”
The construction of Canada’s first LNG export facility could support the rapid development of U.S. natural gas capacity to propel the North American region to the top of the LNG chain. Over the last year, several oil and gas majors have announced new LNG projects aimed at solidifying U.S. energy security and providing a new gas supply chain in the wake of the Russian invasion of Ukraine and subsequent sanctions on Russian energy. However, the U.S. has been criticised for approving so many LNG projects that are far from completion, with first production years away, meaning it could contribute to long-term carbon emissions and compromise the government’s climate pledges.
There is great enthusiasm within the Canadian oil and gas industry around the construction of the country’s first export terminal. This development could help Canada to play a major role in the expansion of North America’s LNG supply chain. However, the new gas project calls into question some of Canada’s climate pledges, with the risk of spurring a longer-term reliance on fossil fuels, as the expansion of the facility could take place well into the next decade.
By Felicity Bradstock for Oilprice.com
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